Fox Business reports that, in the wake of the failed bonds-for-stock swap attempted by GM, they and their Treasury masters have made a second offer that cannot be refused. If and only if a sufficient number of bondholders agree to not oppose a federal/UAW takeover of GM in bankruptcy court by 5 pm Eastern Saturday, the Treasury will reward them and the current stockholders with an initial 10% stake in Government Motors and an pair of warrants to ultimately increase that stake to 25%. The US Treasury will begin with a 72.5% stake, and the UAW with a 17.5% stake, so those of you still holding GM stock will likely be wiped out entirely.
Fox Business also reports that currently, 20% of the bondholders have swallowed the pill whole. Quoting a group of bondholders that apparently are at least part of that 20%: “Since the initial offer was made on April 27th, circumstances have materially changed that make today’s offer more attractive.” Could that be related to the utter thrashing that Chrysler’s secured creditors have taken?
Summarizing from the SEC filing:
- The transfer of assets from General Motors (“Old GM”) to Government Motors (“New GM”), which will not include the $27.2 billion in bonds or most of the unsecured claims, will happen under Section 363 of the bankrupcy code.
- All but $8 billion of whatever funding the US Treasury, and possibly the Ontario and Canadian governments, has or will pour into both Old GM overall (including the $20 billion in TARP bailouts) and New GM in relation to the bankruptcy proceeding will never be paid back.
- Related to that, it is anticipated that Debtor-In-Possession financing provide by the Treasury will be in excess of $50 billion.
- In addition to the $8 billion in debt the New GM will owe to the federal government, they will owe the UAW’s VEBA $2.5 billion and “other debtors” (presumably the secured creditors) $6.5 billion.
- In addition to the 72.5% common-stock stake that the Treasury will have, they will also receive $2.5 billion in perpetual prefered stock with a 9% dividend per annum (or $225 million per year). If the Canadians participate in the DIP financing, they will get a portion of this.
- In addition to the 17.5% initial common-stock stake that the UAW’s VEBA will have, they will also receive $6.5 billion in perpetual prefered stock with a 9% dividend per annum (or $585 million per year). They will also receive a warrant to purchase an additional 2.5% (as of 12/31/2009) any time before 12/31/2015 at a cost of $1.875 billion.
- If and only if a sufficient number of bondholders, unspecified in the filing, agree to not oppose this, “Old GM” will get a 10% common-stock stake in “New GM”. If that number is not reached, the Treasury will reduce or eliminate that stake, presumably with the percentages of Treasury and UAW ownership in New GM increasing accordingly to 80.6% Treasury and 19.4% UAW in the event of a outright elimination.
- Again if and only if an unspecified number of bondholders agree to not oppose this, they will recieve a pair of warrants: one to purchase an additional 7.5% stake of New GM any time in the next 7 years for $1.125 billion and one to purchase an additional 7.5% stake any time in the next 10 years for $2.25 billion. Again, if that number is not reached, the Treasury will reduce or eliminate this program.
Revisions/extensions (6:31 pm 5/28/2009) – I might be missing something here, but there is nothing in the SEC Form 8-K linked to above that says that the bondholders themselves will get anything. The 10% initial stake in “New GM” and the pair of 7.5%-stake warrants in same go to the owners of “Old GM”.