BREAKING: GM lurches toward bankruptcy as bondholder offer fails
General Motors is teetering ever closer to the brink of bankruptcy today, as the automaker's exchange offer for its outstanding debt fell "substantially" short of the necessary take-rate. GM had offered some $27.2 billion of its unsecured public notes to its bondholders, but the offer expired at noon yesterday without having the minimum tender amount met. The U.S. Treasury Department had mandated that at least 90 percent of bondholders would have to agree to swap their shares for a 10 percent stake in the GM, but far too few failed to take GM up on its offer, effectively negating any swap at all under the conditions of the tender offer.
A number of major bondholders had originally countered with an offer to give up their stocks in exchange for a markedly larger stake in the company – 58 percent – but with the lion's share of the company already promised to the United Auto Workers' VEBA fund and to the U.S. government, the bondholder issue was widely expected to fail.
As a result, many are expecting GM to file for Chapter 11 bankruptcy by Monday, with The Detroit News reporting that GM's board of directors scheduled to meet earlier than that to discuss whatever options they may have left. Official GM press release after the jump.
[Sources: General Motors; The Detroit News | Image: Bill Pugliano/Getty]
PRESS RELEASE:
GM Exchange Offers for Outstanding Public Debt Expire
DETROIT - General Motors Corp. (NYSE: GM) today announced the expiration of its exchange offers for $27.2 billion of its unsecured public notes and the related consent solicitations that were commenced on April 27, 2009. No further tenders of notes will be accepted and any notes previously tendered pursuant to the exchange offers will be promptly returned to the tendering holders.
The exchange offers expired at 11:59 p.m. EDT on May 26, 2009, at which time the principal amount of notes tendered was substantially less than the amount required by GM to satisfy the debt reduction requirement under its loan agreements with the U.S. Department of the Treasury, to meet the debt reduction objectives under its viability plan, or to meet the minimum tender condition of the exchange offers as required by the U.S. Treasury. Since these conditions, as well as certain other conditions, have not been satisfied, the exchange offers will not be consummated.
Due to the foregoing, GM has also cancelled the meetings of noteholders with respect to each series of non-US dollar-denominated notes which were scheduled to take place on May 27, 2009 in relation to certain amendments proposed in connection with the exchange offers.
The GM Board of Directors will be meeting to discuss GM's next steps in light of the expiration of the exchange offers.
Forward Looking Statements
This document contains "forward-looking statements." Such statements are based on the current expectations and assumptions of GM management, and as such involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those now anticipated. To better understand these risks and uncertainties, holders of notes and other readers are encouraged to read carefully GM's Annual Report on Form 10-K for the fiscal year ended December 31, 2008 which was filed March 5, 2009 and GM's Current Report on Form 8-K filed on May 14, 2009 which updates and supersedes the Annual Report in relation to Item 6 - Selected Financial Data, Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations, and Item 8 - Financial Statements, GM's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2009 which was filed on May 8, 2009 and other GM filings with the Securities and Exchange Commission (SEC), all of which can be accessed free of charge at the websites of the SEC (at www.sec.gov) and GM (at http://www.gm.com/corporate/investor_information).
General Motors Corp. (NYSE: GM), one of the world's largest automakers, was founded in 1908, and today manufactures cars and trucks in 34 countries. With its global headquarters in Detroit, GM employs 235,000 people in every major region of the world, and sells and services vehicles in some 140 countries. In 2008, GM sold 8.35 million cars and trucks globally under the following brands: Buick, Cadillac, Chevrolet, GMC, GM Daewoo, Holden, Hummer, Opel, Pontiac, Saab, Saturn, Vauxhall and Wuling. GM's largest national market is the United States, followed by China, Brazil, the United Kingdom, Canada, Russia and Germany. GM's OnStar subsidiary is the industry leader in vehicle safety, security and information services. More information on GM can be found at www.gm.com.
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Reader Comments (Page 1 of 4)
oby 9:05AM (5/27/2009)
If was never 'if' but when! Gimme Motors is just about legally bankrupt now but it was factually bankrupt years ago and productwise bankrupt decades ago.
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Rogue_G 9:06AM (5/27/2009)
Sadly, it's about time. Here's hoping it comes out of it a better company.
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Kumar 9:13AM (5/27/2009)
It looks like the Treasurer of Indiana is one of the flies in the ointment (if you view the bk/recovery plan as a fix that is). It turns out they oh so *wisely* invested money in Chrysler bonds for their state teacher's pension fund, Major Moves highway projects, and state police pension.
Being a Hoosier, I'm not too surprised that they did the equivalent of burning their money. It will probably turn out they though they'd get some sweetheart deal with a bankruptcy....gambled...and lost big time. Looks like they'll get back 28 cents on the dollar of my tax money....awesome.
Here's the linky from my local newspaper.
http://www.indystar.com/apps/pbcs.dll/article?AID=2009905270350
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Colin Smith 9:58AM (5/27/2009)
How idiotic to invest public money in a car firm that has been in trouble for ages. He shouldn't be blaming the government, or Chrysler, or anybody but the persons responsible.
jv2k 1:45PM (5/27/2009)
"I'm in NYC, so maybe that makes a difference. "
You need to open your eyes and meet more people then. There are tons of GM vehicles out in nyc.
Ron 9:22AM (5/27/2009)
They need to shut down both GM & C, then liquidate both companies.
These two will never recover, nobody I know even considers either when shopping for a new car.
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Pete 9:36AM (5/27/2009)
Saying nobody considers them is ridiculous.
GM still sells TONS of vehicles all over the world. Their trucks and SUVs are the best out there, AND people are still buying both. Chrysler still sells tons of Jeeps and Mini-Vans. I for one have had a pre-order in for a 2010 Camaro for months. Both companies make some great products and if it weren't for the current economic downturn they would still be making money and more slowly restructuring their companies to stay competitive. Even Toyota is loosing money.
mapoftazifosho 9:51AM (5/27/2009)
I just purchased a 2009 Cobalt SS and a 2009 Saturn VUE. Not because they were American, but because they were he best in their segment. The VUE is better than the Honda CR-V, the Ford Escape and the Toyota RAV4.
The Cobalt SS cannot be beat in terms of a fun SCC.
I also just put my mom into a 2009 Lexus IS...it was the best in it's segment.
Saying that no-one considers GM is an ignorant statement. They sold 9 million vehicles in 2007. They still outsell Toyota in the US.
Ron 9:58AM (5/27/2009)
@Pete & mapoftazifosho
I didn't say NOBODY, I said nobody I know.
I'm in NYC, so maybe that makes a difference.
Pete 10:12AM (5/27/2009)
Sorry If I came off harsh. I live in Boston and I agree that there are very few people looking at american cars. It seems like many people are just stuck in the mind set that US cars are still making cars like they did in the 80's through the early 90's.
Either way this whole situation sucks for the car industry as a whole.
Mr.Oak 11:25AM (5/27/2009)
Ron: I'm in NYC, I see sh*t loads of GM vehicles.
NYC = Brooklyn Bronx Staten Island Queens Manhattan. The Metro New York Area includes Northern NJ, Southern Ct., Westchester and Rockland counties, all combine to form the NYC motoring scene.
Next time you're out in NYC, the following vehicles are all made by GM.
Cadillac: Escalade, I see one at least every 70 seconds that I am on the streets of Manhattan. Possibly, only Yellow cabs and NYPD cars are more present.
GMC/Chevy: Yukon,Tahoe and Suburban prowl the streets of Brooklyn, Bronx and Harlem & Essex county NJ. Very popular with Cops, Correction Officers, thugs and wanna be thugs. Roughnecks don't drive Ridgelines.
Most of the folks that you know probably fall into the status buying crowd. These are the folks who will buy anything with a foreign (especially European) badge. Coincidentally, I know some of those folks too. The really funny ones, are the ones that buy Range Rovers knowing how poor a reputation they have, then cry about it.
Dude, the car culture is regional. Subarus and Volvos always sold well in New England, and that was long before the WRX ever existed. Subarus and Volvos are not as popular in Georgia and Tennesee, does that mean they don't sell?
Yikes 9:22AM (5/27/2009)
Who is less capable of running a profitable business.
Obama, or the UAW?
What i'm worried about, when will we be required to purchase Government Motors vehicles?
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DesiAuto 9:27AM (5/27/2009)
At this point I trust Obama and UAW more than I would trust ANY business leader ... business leadership in this country is at all time low. Sure there are some good business leaders, but they are few.
Short-sighted, greedy business leaders have brought the GM and C down, nothing else.
HCL3 9:40AM (5/27/2009)
On one hand you have the UAW who for 70+ years has been asking for more and more money in exchange for less and less work and lower quality work, on the other hand you have management that has been scared to death of playing hardball with the unions. They both are to blame.
GM and C will never be sucessful until they deal with their union problems. If they had any sense they would be kicking the UAW to the curb via bankruptcy and would start moving factories to right to work states and overseas.
John 9:48AM (5/27/2009)
"At this point I trust Obama and UAW more than I would trust ANY business leader".
It was this kind of thinking that got Lenin, Hitler, and Castro in power.
Only a fool would think it couldn't happen again. Before you bashers chime in, I suggest you pick up a history book and really read how those people came into power. I did and it's absolutely frightening seeing the parallels between the hatred of capitalism in 2009 USA and those countries.
Nathan 9:48AM (5/27/2009)
"At this point I trust Obama and UAW more than I would trust ANY business leader ... business leadership in this country is at all time low. Sure there are some good business leaders, but they are few. "
You trust the UAW?! This is exactly what Obama wants you to think, all so he can slowly strip away everything this country has ever accomplished. Clearly you don't realize just how many businesses there are in the United States, you only listen to the liberal media telling you about the few poorly run ones. Hopefully you'll love Obama just as much when he's providing you with a job, government housing, and 3rd world health care services.
krische 10:32AM (5/27/2009)
"you only listen to the liberal media"
oh boy. here we go...
jamie 10:52AM (5/27/2009)
Obama hasn't even run a lemonade stand let alone a multi-national corporation. And the citizens of this once great nation elected him POTUS???
Talk about the blind leading the blind!
wpulyk 11:10AM (5/27/2009)
Jamie, I don't recall McCain having business experience either. I assume you were suggesting that he was the better choice for the types of economy-related hardships we are now seeing.
Smegley 11:44AM (5/27/2009)
The only thing I trust POSident Obama to run is this country down a toilet.
Change = spreading the love of Southside Chitcago to the rest of the country. Damn I hope my state secedes from this crappy union.