Ta-Da! GM Bondholders Relent

Small GM BondholdersAt least some of them did, and they’ve agreed to take the 10-percent stake the company offered, plus warrants (permitting them to buy stock at a low price) for up to 15 percent more. Some of the largest bondholders have now come on board, but the Treasury still needs acceptance from more of the unsecured creditors, who could otherwise tie up bankruptcy proceedings for years. These small investors are looking at big losses.

Altogether, GM has some 35 percent of its bondholders now agreeing to the deal. That’s not enough, so the death watch will continue, at least through Monday. Don’t, however, hold your breath, since bankruptcy is still the most likely outcome, which may take at least 60-90 days. However, last night’s deal might speed up the process.

In a not-so-favorable development, GM’s Opel-Vauxhall talks in Berlin hit the fan last night, with no agreement on a crucial bridge loan to keep GM-Europe going during the parent company’s presumed bankruptcy. Apparently, the GM and Treasury representatives may have torpedoed the working agreement by suddenly announcing the company needed $415 million more in short-term financing (beyond the $2.1 billion Berlin had offered).

Shocked, the Germans called this demand “bizarre” and “impertinent.”

Klaus Franz, head of Opel’s works council, echoed the accusations of amateurish strongarming: “The German government is right in not allowing General Motors to blackmail it. It demands from GM to either pay for the additional financing need[ed] or to give a guarantee to cover it. General Motors has to know that Europe is no casino for gamblers. It is solely for General Motors to bear the blame, as they wanted to make us a puppet in the poker game about their bankruptcy.”

The talks did reduce the number of potential partners to two, Fiat and Magna, and another meeting was scheduled for Friday. If that one also goes down the tubes, Opel will be headed for bankruptcy, some 25,000 Germans will lose their jobs, and there will be, you can bet, big political repercussions.

Do you think there’s a way to bring the remaining 65 percent of GM bondholders (or a good portion of them) on board? Should the government sweeten the deal?

—jgoods

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