Out of gas? It's only a question of when a bankruptcy filing comes.
General Motors Corporation announced this morning the expiration of its exchange offers for $27.2 billion of its unsecured public notes that began on April 27, 2009.
GM also said that no further tenders of notes will be accepted and any notes previously tendered under the exchange offers will be promptly returned to the tendering holders.
The offer to exchange debt for equity expired at 11:59 p.m. EDT on May 26, 2009. GM said the principal amount of notes tendered was substantially less than the amount required by GM to satisfy the debt reduction requirement under its loan agreements with the U.S. Department of the Treasury. GM is currrently being kept solvent by $19.6 billion in taxpayer loans.
Bondholders were offered 225 shares of stock in the new company or a roughly 10% stake. GM bonds are trading as low as 6 cents a dollar this morning.
Since massive debt reduction under GM’s oft revised viability plan is key to survival, it is now virtually certain that bankruptcy will be used to obtain such reduction. GM’s CEO Fritz Henderson has repeatedly said that GM would reorganize with the help of bankruptcy if the terms of its viability plan, a 180-degree reversal from his previous position while working for the Treasury deposed chairman, Rick Wagoner.
Chrysler LLC entered bankruptcy protection last month to obtain such relief.
GM Bondholders, some them retirees and financially strapped small investors, will likely now lose all of their money. Thus, the ongoing tragedy produced by the collapse of the U.S. auto industry continues to drag the entire economy down.
The GM bankruptcy will be among the largest and most complicated in U.S. history, mirroring the collapse of the U.S. financial system late last year.
The GM board is meeting to consider next steps.
GM has also cancelled the meetings of noteholders of non-US dollar-denominated notes, which were scheduled to take place on May 27, 2009.