Debt deal's failure steers GM to brink of bankruptcy
DETROIT -- The automaker attempted to persuade bondholders to trade in $27.2 billion in unsecured public debt notes in exchange for a 10% stake in the restructured automaker. GM needed 90% of bondholders to agree to the plan. On Wednesday, the automaker said the amount of notes turned in was "substantially less than the amount required by GM to satisfy the debt reduction requirement" set forth by the U.S. Treasury.
GM needed to get the deal done to qualify for more loans from the U.S. government. It faces a Monday government deadline to complete certain restructuring moves.
The Associated Press reported early Thursday that a source familiar with discussions between GM and the government said any Chapter 11 bankruptcy filing would probably come around the government's Monday deadline for GM to submit its restructuring plans. The person asked not to be identified because the talks are private, the AP report said.
Another of the required moves may be completed Thursday, however, as United Auto Workers members begin voting on cost-cutting contract changes negotiated by UAW leaders and GM. Included is taking a 20% stake in GM to satisfy part of GM's debt to a union-run retiree health trust.
The U.S. government, which would commit billions more to GM's court-supervised restructuring, stands to become the majority owner.
Still, the White House said it was continuing to talk with bondholders. "We're working towards — our hope is — an agreement with all the stakeholders involved to continue General Motors, and I think we're making progress," spokesman Robert Gibbs said. "Hopefully, we'll have news to report soon on that."
Meanwhile, Germany scrambled Wednesday to protect GM European unit Opel from a bankruptcy filing by the parent. Government officials met with Opel bidders in Berlin on a plan to separate Opel assets from GM and provide it with loans until a sale can be closed. Italy's Fiat, Canadian auto parts company Magna, Belgian equity firm RHJ and China's Beijing Automotive Industry Corp. are vying for Opel.
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