The Ren Cen is empty for the Memorial Day holiday, and once again the coffers are empty, too.
General Motors Corporation confirmed late today that it will draw an additional $4 billion in U.S. Treasury loans to maintain adequate liquidity as the company undergoes what it calls an “aggressive restructuring.”
Today’s loan is $1.4 billion higher than the amount GM forecast in the April 27, 2009 S-4 Filing for the $27 billion Bond Exchange Offer and “reflects updated timing of when certain expenses would be incurred.”
Total U.S. Treasury funding received by GM to date is now $19.4 billion. The amount is paltry compared to the ongoing bailouts of financial institutions, but all told the bailout is now shaping up to cost taxpayers about $45 billion, and rising.
Nonetheless, a bankruptcy filing could come from GM as early as next week since bondholders are refusing to accept debt-for-equity in a restructured company. GM is offering 225 shares in a new company for each $1,000 in debt, a 10% stake. What such shares are worth is debatable and bondholders with $27 billion in paper debt are refusing the deal. GM needs 90% of the bondholders to agree by next Tuesday when its exchange offer expires. The same situation forced Chrysler LLC into bankruptcy protection last month.
Critics of taxpayer intervention have predicted that GM cannot become viable and will represent a continuing drain on the U.S. Treasury.
Back in February GM requested $22.5 billion in taxpayer assistance for its restructuring.
The restructuring plan also assumes that GM will receive $5.6 billion from foreign governments, and another $5.7 billion from the U.S. Department of Energy to develop fuel efficient vehicles. None of this is certain.
GM attributed its need for more money then to a higher negative cash flow that resulted from lower than forecast vehicle sales. Through April, GM sales have plummeted 45% in the U.S.
On April 22nd, GM entered into a Second Amendment to the existing Treasury Loan Agreement, dated as of December 31, 2008, between GM as Borrower and the U.S. Treasury, which increased to $15.4 billion the maximum amount available under the agreement. GM borrowed the remaining $2.0 billion available under that agreement on April 24th, 2009.
On May 20, 2009, GM entered into Amendment Number Three to the Loan and Security Agreement, which increased the aggregate maximum amount available for GM to borrow under the Loan Agreement by $4.0 billion to $19.4 billion.
On May 22, GM borrowed the $4.0 billion under the Loan Agreement and delivered an additional note payable to the U.S. Treasury in a principal amount of $266.8 million as compensation for the loan or advance under the terms of the Agreement of December 31, 2008 between GM and the U.S. Treasury. As required by the Loan Agreement, prior to receiving the Advance, GM provided a statement describing its intended use of the proceeds of the Advance, which was considered acceptable by the U.S. Treasury.