Scrapyard recoveries

29 May 2009 By Richard Beales Follow @richardbeales1

Like the government and unsecured bondholders, the UAW has agreed to take some of what it’s owed in the form of equity in a restructured GM. As at Chrysler, they stand a better chance of recovering it than Uncle Sam or creditors. Our calculator shows you how.

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General Motors filed details of its proposed restructuring plan on May 28, in anticipation of filing for bankruptcy – after which substantially all of the company's assets would be sold to a new company, New GM.

Under the plan, the US government would own 72.5% of New GM in exchange for upwards of $50bn of investment; the union VEBA benefits plan would own 17.5%, in lieu of some $10bn of benefits funding; and unsecured bondholders would get 10% in exchange for the debt they hold, with about $27bn face value.

The bondholders would also have warrants to buy another 7.5% of stock at a price equivalent to the market value of New GM (based on its initial share count) reaching $15bn, and a further 7.5% at $30bn.

The VEBA plan, meanwhile, would have warrants to buy another 2.5% of stock if the market value of New GM reached $75bn.

The US government and employees will also separately receive debt or preferred stock in New GM. Along with senior creditors who will get new debt, New GM's total debt and preferred stock will be about $26bn.

GM filing

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The VEBA plan, meanwhile, would have warrants to buy another 2.5% of stock if the market value of New GM reached $75bn.

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