It's the General Motors and Chrysler merger saga, take three. A few months ago, GM said "No can do" to the union, taking off its ring and walking out of church. Now GM's bondholders may be contemplating a shotgun wedding, forcing The General back to the altar over the debt-equity swap the automaker needs to conclude to have a chance at more government financing.

GM needs to shed $18 billion in unsecured public debt, but the bondholders have so far been complaining about the equity they're being offered. According to an outside analyst, if bondholders think a merged GM-Chrysler will save the combined company from $6 billion to $8 billion dollars, the bondholder might only agree to the debt-equity swap if GM merges with Chrysler. GM hasn't shared its exchange plan with the bondholders yet, so the stakeholders could change their minds once they have the information.

Of course, the problems with the merger possibility don't appear to be any different than they were last time, and while it might seem appealing to "collapse two problems into one," critics say that one combined problem could be a bigger hassle for the government than the two together. The merged company would still need funding, on top of which it would need billions to simply complete the merger. In short, this deal still doesn't look like it makes sense. Hat tip to Dan.

[Source: Financial Post]