GM Bondholders Seek Parity With UAW Terms In Debt Swap
February 12 2009 - 12:38PM
Dow Jones News
General Motors Corp. (GM) bondholders are insisting they recoup
at least half the debt owed to them by the U.S. automaker,
substantially more than called for under loan terms set by the U.S.
government.
GM is negotiating with bondholders and its labor unions to shave
billions in debt as part of a recovery plan the company must
deliver to the U.S. Treasury by Feb. 17.
The viability plan is a key requirement for the $13.4 billion in
federal loans secured by GM.
A person familiar with the committee representing bond holders
on Thursday said the group is seeking parity with the United Auto
Workers.
Under the loan terms, the union is asked to forgo half of the
more than $20 billion that GM owes to a union-run retiree health
fund in exchange for equity. The plan calls on GM to reduce its
overall debt by two-thirds.
Chrysler LLC faces similar demands. The two auto makers are
surviving on $17.4 billion in federal loans granted late last year
to save the companies from seeking bankruptcy protection.
Lenders have already started talks with Chrysler about a
debt-for-equity swap, and aim to start the process by the Tuesday
government deadline, people familiar with the talks said
Wednesday.
The auto maker is seeking a further $3 billion in U.S.
government loans and must win concessions from creditors, employee
groups and other stockholders to prove its long-term viability.
GM bondholders last week received an early version of the
restructuring plan GM intends to present Tuesday, the person said,
describing the plan as "a very comprehensive" attempt to address
competitive shortcoming between GM and foreign-based rivals.
As of Thursday, the new U.S. administration had yet to appoint a
so-called auto czar, who is meant to receive the automakers'
viability plans.
The lack of a figurehead has complicated negotiations amid a
wider lack of clarity about what the Treasury is seeking.
President Barack Obama said whether the auto makers get
additional helps depends largely on the plans they present Tuesday,
Reuters reported Thursday.
"My goal, consistently has been to offer serious help once a
plan is in place that ensures long-term viability and that we're
not just kicking the can down the road," Obama was quoted by
Reuters as saying. "What the nature of what that help ends up
looking like, I think is going to depend on the plan."
-By Sharon Terlep, Dow Jones Newswires; 248-204-5532;
sharon.terlep@dowjones.com