GM to Swap $48 bln Debt for Equity

GM (GM), which is expected to outline by the end of this month the key elements of its plan as part of an offer to bondholders to swap debt for equity in the company – has been instructed to prepare a new plan.

The Obama administration has directed General Motors Corp to prepare a new restructuring plan that would pay off bondholders and the automaker’s major union in stock in exchange for $48 billion in debt..

The U.S. Treasury…has indicated that it could also convert those taxpayer-backed loans into GM stock.
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GM plans to make the new proposals to bondholders and the United Auto Workers union within the next two weeks. [via Reuters]

While bankruptcy is probable for GM, it is certainly not the co.’s preferred path. GM President and CEO Fritz Henderson on Friday said the automaker, which will need nearly $5 billion cash infusion in Q2 to keep operating, is pushing forward with a sweeping restructuring while also preparing for a possible bankruptcy.

“I felt several weeks ago that it would be more probable that we would need to go through a bankruptcy process,” Henderson said. “That continues today. But I wouldn’t be able to hazard a guess as to what the probabilities would be.” [via DetroitNews]

GM has received $13.4 billion so far in federal aid and the co., if it’s forced to seek court protection, would continue to face challenges even after it emerges from bankruptcy.

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