GM May File for Bankruptcy as Early as Next Week

UPDATE #2 General Motors, which today unveiled a sweetened deal to shed billions in debt, plans to file for bankruptcy reorganization Monday, the Free Press has learned. The Obama administration today offered General Motors Corp. creditors carrying $27.2 billion of the company's bonds up to 25% of a reworked GM if they vowed not to oppose its bankruptcy — a deal that officials said had the backing of at least one-third of the bondholders.

GM also revealed that the U.S. Treasury plans to give GM at least an additional $30 billion to pay for the bankruptcy on top of the $19.4 billion already lent to keep the automaker in business, with all but $8 billion of that about $50 billion swapped for an initial 72.5% stake in the new GM.

While the automaker and the administration declined to say when GM might file, the pitch to bondholders made clear that the future of the nation's largest automaker runs through a bankruptcy case likely to start Monday.

“Our 60 day … deadline is approaching," a person familiar with the efforts said.

“Something momentous is going to happen next week. We all know that," Bob Lutz, GM vice chairman, told the Automotive Press Association in Detroit.

He added: “We will pass through the cleansing fire of a radical restructuring either in court or out of court in the next few days."

If bankruptcy occurs, GM plans to exit quickly, he said. “Everybody would have an incentive to get in and out as quickly as possible," Lutz said. “A Chapter 11 that lasted for months and months would be very damaging." More at Detroit Free Press

05/27/09 General Motors Corp. has failed to lure enough bondholders to swap debt for a 10 percent stake in the company, which pushes the automaker closer to a Chapter 11 bankruptcy filing.

The amount of bondholders who agreed to the swap was "substantially less" than the 90 percent mandated by the U.S. Treasury Department, which has loaned GM $19.4 billion.

The offer, which expired at 11:59 p.m. Tuesday, was widely viewed as unlikely to tempt GM's unsecured bondholders to exchange about $24 billion in debt for a 10 percent piece of the restructured automaker.

The failed exchange could force GM to file Chapter 11 bankruptcy by Monday, the deadline by which the automaker was required to restructure and reach money-saving concessions with the United Auto Workers and bondholders.

"The GM Board of Directors will be meeting to discuss GM's next steps in light of the expiration of the exchange offers," the automaker said in a statement today. More at Detroit News

05/22/09 The Obama administration is preparing to send General Motors (GM) into bankruptcy next week under a plan that would give the struggling automaker tens of billions of dollars more in public financing, The Washington Post reported on Thursday, citing sources familiar with the discussions. Under the GM draft bankruptcy plan, the company would receive nearly $30 billion in additional federal loans, the newspaper quoted a source as saying.