REPORT: GM hedges bets, plans to miss $1B debt payment deadline
The familiar expression goes "Better the devil you know," meaning it's preferable to deal with the nasty things you don't like but are at least familiar with. General Motors, however, doesn't seem to think so. The troubled automaker appears more ready to take its chances with bankruptcy than continue to fight the weight of monumental debt and the demands of restructuring it.
GM has a $1 billion payment due on June 1, the same day as the government-imposed deadline for having its financial house cleaned up. The company's chief financial officer has just gone on record as saying that GM does not intend to make that payment. The General will attempt another round of debt-for-equity swaps (DFE) with its bondholders, and if it succeeds – and also succeeds in restructuring $20 billion in UAW healthcare obligations – it will get money from the government to continue without bankruptcy. If the DFE doesn't meets its goals, then GM is set to go into government-backed Chapter 11, court protection and what will likely be a nearly clean slate to restart its debt negotiations.
Last week, bondholders said they were preparing a response to GM's most recent offer. The automaker says that it will do what needs to be done "in court or out of court," which means that unless the bondholders' response is "Yes," bankruptcy is a fait accompli.
[Source: Wall Street Journal | Image: Bill Pugliano/Getty]
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Reader Comments (Page 1 of 2)
MachinaDC5 4:06PM (4/22/2009)
"So long, suckers!"
-GM
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iamhoff 4:11PM (4/22/2009)
Ya know, at this point I'm ready for them to go bankrupt. There have been enough large-scale BKs in recent times (airlines anybody?) where the company kept operating, that BK is probably the best option for survival. Bring it on!
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Alex 4:15PM (4/22/2009)
I'm ready for GM to fold up shop and come back as new GM.
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adrenalnjunky 4:21PM (4/22/2009)
Yeah - but the public won't like it as much, and they'll be forced to release "GM Classic".
Auari 4:18PM (4/22/2009)
I'm not happy about this at all, just exited to see what happens, It's like something that's been going on for along time and June 1st ITS GOING TO EXPLODE!
I'm more exited about this than my own 21st birthday, I just picture something crazy happening.
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Dunc 5:25PM (4/22/2009)
If you are more excited about this than your 21st birthday you live a sad lonely life.
Farris 6:04PM (4/22/2009)
Not necessarily, Dunc. My 21st birthday is on June 14th, and this really is more exciting to me than my birthday...
...but then again, I don't drink due to religious reasons, so it'll just be another day for me.
Randy 9:00PM (4/22/2009)
I think this is more excited than my 21st birthday too! Heck, I drank WAY before I was 21! 21 just made it acceptable!
This is like Y2K and the End of the World! I'm pumped!
CNN should have 24 hour coverage! I'd a said Fox News too but they'd probably blame Andrew Jackson (the first democrat President) for everything! They'd find a way to tie it to him!... ;)
Matt 9:55PM (4/22/2009)
@Farris: Are you interested in gambling or "adult oriented entertainment venues"? Personally, I'd be excited about those if I didn't drink
fizzandpop 4:21PM (4/22/2009)
Are they doing the old "Not known at this address" trick? You send the bill back marked thus, then claim you never got it when they come calling. They produce the returned bill and you claim your roommate must have done it by mistake. Works every time. When GM do eventually send in the check, they should staple it to the bill, that way it must be processed by hand. When sending checks always do exactly what it tells you not to do on the bill. Oh, and always remember to forget to sign it.
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why not the LS2LS7? 4:19PM (4/22/2009)
Makes sense to me. Debt for equity made sense for Ford, it makes sense for GM.
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Jake 6:21PM (4/22/2009)
Except who wants equity in a company that could easily go bankrupt soon, get de-listed, is depending on the broke corrupt government to bail it out, and is trying to sell into a difficult and down market in which its customers can't get credit????
I am not signing up for that.
But if their debt is held by banks who are also depending on the government teet, the govt. can force them so that both companies can continue downhill wasting more tax payer dollars.
Let the bankruptsy happen. yes it will be disturbing, but it will settle out. Why do we have to waste several billions of taxpayer dollars in the process.
Ben 4:21PM (4/22/2009)
They should have gone bankrupt to begin with without using up all the taxpayers' money.
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Mike 5:06PM (4/22/2009)
They will be using more (alot more)of the taxpayers money to finance out C11
Derek 4:23PM (4/22/2009)
I'm ready for GM to go into bankruptcy, the stock market to plummet, and then to buy in when completely unrelated items are grossly undervalued.
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Auari 4:26PM (4/22/2009)
That's the way I feel, I thought I was the only one. I'm glad I'm not.
jbuers 4:24PM (4/22/2009)
I really wish I could take out a multibillion dollar loan, tell the lender I have no intention to make my payments, and then ask for billions more. Man, it must be nice to be a huge auto maker!
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taipeileviathan 4:36PM (4/22/2009)
"The familiar expression goes 'Better the devil you know,' meaning it's preferable to deal with the nasty things you don't like but are at least familiar with."
oh autoblog, thank you so much for explaining american idioms so thoroughly lest we the audience--having grown up in caves--completely miss your point. in my own writing, i constantly strive to belittle the reader's intelligence but rarely do i succeed on the level that you do, and you guys do it so naturally, so unwittingly! kudos. actually u'know what, make it double kudos.
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Miguel 5:28PM (4/22/2009)
I'm an Autoblog reader; what are these "kudos" you speak of?
Rogue_G 4:38PM (4/22/2009)
At this point, GM deserves Chapter 11.
They saw the fork coming, then the government took hold of the fork and told them to shape up. Now they just welcome the fork with open arms. Let 'em get stuck.
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