From : CALYON Capital Markets Research, 29 May 09
General Motors: Revised debt-to-equity swap offer to bondholders
In an SEC filing General Motors Corp. announced yesterday that the previous debt-to-equity offer did not attract enough bondholders to proceed with the offer. As a result the US Treasury is proposing a new offer where bondholders would receive 10% of the common equity of New GM and warrants to purchase an aggregate of 15% of the equity of new GM. The US Treasury is also warning that in a Chapter 11 bankruptcy reorganisation the amount of common equity and warrants that it would propose be issued by New GM to Old GM would be substantially reduced or eliminated. The offer runs until 5pm EDT on Saturday 30 May 2009).
The filing also mentions that about 20% of the bondholders have already agreed to the new terms on top of the existing 15% that agreed to the first offer. As a result of this new offer the outstanding common equity of New GM would be allocated as follows (excluding effects to the warrants): 72.5% to the US Treasury, 17.5% to the UAW healthcare fund VEBA and 10% to Old GM bondholders and shareholders. This new offer if widely accepted would pave the way for a quick Chapter 11 reorganisation and we still expect GM to file for Chapter 11 in the next few days.
We remain Underperform the Autos sector.
Analyst: Christophe Boulanger, Autos Analyst, CALYON Capital Markets Research