Blame game

27 May 2009 By Antony Currie Follow @AntonyMCurrie

The president may blame their final rejection late last night of the carmaker s debtforequity offer for forcing the carmaker into bankruptcy much as he did with Chrysler s lenders. But the administration s union favouritism doomed both offers from the outset.

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Holders of General Motors unsecured bonds have rejected the carmaker's offer to swap $27.5bn of debt for a 10% equity stake in the company. Less than a tenth of bondholders accepted. GM had stated when launching the exchange that at least 90% of the bonds would have to be swapped for the company to avoid bankruptcy.

Separately, the UAW healthcare trust has agreed to take 17.5% in stock rather than the 39% stake offered in the most recent restructuring plan to cover half of the $20bn it is still owed. It will also receive $6.5bn in preferred stick paying a 9% dividend and a $2.5bn note payable in cash by 2017.

The US government is now expected to take up to a 70% stake in GM and will provide at least $30bn in debtorinpossession financing in addition to the $20bn already lent.

Also, the government intends to pay back in full holders of GM's $6bn in secured loans.

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