GM bondholders agreed to accept a sweetened ownership deal, but the company still appears to be speeding towards a Chapter 11 bankruptcy filing.
The deal, which bondholders approved earlier today, offered the bondholders the same 10 percent stake in a reorganized GM that the company had offered before, but this time GM added warrants to purchase up to 15 percent of the company if the bondholders sign off on a fast-track bankruptcy and asset sale backed by the US Treasury. Chrysler is currently employing a similar procedure, and it's likely
that the bondholders didn't want to receive the same harsh upbraiding
that Chrysler bondholder holdouts received from President Obama.
deal almost amounts to an admission that the automaker is preparing a
bankruptcy filing with the support of the US government.
While bankruptcy now seems inevitable for the company, it may be holding off until it can resolve a few open issues.
most pressing of which is the situation in Europe. Talks between the
German government and Opel, the company under which GM has collected
its European assets, broke down after a failure to reach an agreement
on German government financing for Opel in the event of a GM
Without additional financing, Opel runs the risk
of insolvency, although the head of GM Europe, Carl-Peter Forster, says
that the company has sufficient liquidity to last until the third
This aspect of the GM saga is beginning to take on a
geopolitical dimension, with the German Foreign Minister Frank-Walter
Steinmeier stating that he would contact Secretary of State Hillary
Clinton to discuss the situation after German ministers placed the
blame for the breakdown in talks on GM and the US Treasury.
other reason GM may have for delaying a bankruptcy filing is the
upcoming concession vote among United Auto Workers members. GM has
offered the union a seat on the board and a 17.5 percent stake in the
new company in exchange for concessions. The union members are
expected to approve the measure.
Then, once these issues have wrapped up, it's time for the biggest industrial bankruptcy in US history.
Get the popcorn ready.
See Also: GM says bondholders support sweetened offer (AP)