According to The Wall Street Journal, a majority of investors holding more than $27 billion in the General Motor’s (GM) bonds, agreed to support a new plan to exchange debt-for-equity for an ownership stake in the company as high as 25%. The new plan would initially give bondholders a 10% stake of the restructured automaker and warrants for another 15%.
From The WSJ: [T]he company said getting bondholders to agree to a debt swap was its best chance for avoiding Chapter 11. But the latest plan is designed to expedite a bankruptcy filling more than to avoid it. As part of the agreement, bondholders pledged not to oppose GM’s reorganization in court.
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Under the plan…GM won’t have to repay the loans; instead, the government will turn them into a controlling stake in the company.
Bondholders are coming out of the new deal with around 10 cents on the dollar, compared to as little as nothing under the old offer.
GM used to be king of the road, capturing nearly 50% of the U.S market share. The video below comments on the automakers’ ups and downs.
