Third time doesn't charm

27 April 2009 By Antony Currie Follow @AntonyMCurrie

The teetering carmaker is slashing dealers, factories and workers, cutting brands, offering bondholders shares only and even wants the US to swap half its loans for equity. But it may still leave GM s balance sheet laden with tens of billions of dollars of liabilities.

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General Motors presented an updated version of its viability plan. GM is seeking up to $11.6bn in aid fro the US government but is also proposing that $10bn of taxpayerfunded loans be converted to equity, leaving the US owning at least 50% of the carmaker. The independent healthcare Veba trust is being offered a 39% stake in the company in return for swapping half of the $20bn owed by GM. The company plans to shut the Pontiac brand, accelerate cost reductions and reduce the number of dealers by 42% .

GM also launched an exchange offer for its $27bn of unsecured public notes, proposing to exchange 225 common shares for each $1,000 principal amount of outstanding notes. The exchange will commence only if 90% of bondholders agree to the terms. Under the plan, if GM fails to get adequate participation, it will file for bankruptcy protection.

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