GM had offered bondholders a 10 percent stake in the restructured company to reduce its $27 billion debt and avoid going into bankruptcy court. However, yesterday GM failed to gain the near 90 percent of bondholder support to accept a debt-for-equity swap. Sources say that GM is now planning to file for Chapter 11 bankruptcy by June 1.
According to a report by the New York Times, the U.S. Treasury will have to inject an additional $50 billion to get GM through Chapter 11. It has already loan more than $20 billion to the struggling automaker. In return for its ‘investment,’ the U.S. Treasury Department will receive about 70 percent of the restructured GM.
Meanwhile, the UAW will get up to 20 percent through its retiree health care fund and bondholders will get the remaining share. GM shareholders will eventually be wiped out.
– By: Omar Rana
Source: New York Times