Bondholders of General Motors Corp warned the US government on Sunday that the struggling automaker will likely be forced to file for bankruptcy if the debt restructuring proposal they have suggested — or one like it — is not accepted.
In a letter to the US Treasury and members of US President Obama’s auto task force, financial advisers to GM’s bondholders said the current debt swap plan on the table won’t draw enough support from lenders.
“The result of such a failed exchange would likely be a bankruptcy that would have dire consequences for the company, the tens of thousands of hardworking Americans that GM employs and the economy as a whole,” the advisers from investment firm Houlihan Lokey wrote.
GM is required to reduce its US$28 billion in unsecured debt by two-thirds under terms set by the George W. Bush administration in December on the company’s US$13.4 billion bailout loan. The Detroit automaker is nearing a deadline next Tuesday to get concessions from both union workers and debt holders as it races to complete restructuring plans required under the terms of its government loans.
GM has offered bondholders some equity in exchange for the debt.
But bondholders have been reluctant to accept concessions that would leave them with only a small portion of the face value of their bonds.
“GM bondholders are not a collection of ‘Wall Street banks,’” the advisers wrote. “Many of these bonds are owned by average citizens, who purchased them to support their own retirement and college expenses and other critical needs.”
However, the group runs the risk of losing everything in a bankruptcy proceeding and has discussed whether the government would guarantee new bonds that GM would issue as part of its restructuring.
The group’s advisers said they believe the framework bondholders presented to the task force on March 5 would receive a high level of support from investors necessary to restructure GM out of court.
Further details of that proposal weren’t disclosed.
In Sunday’s letter to Treasury Secretary Timothy Geithner and the task force, the advisers the five-year restructuring plan presented by company on Feb. 17 moves GM in the right direction. However, the plan puts too much faith in the economy turning around quickly and annual car and truck sales ratcheting up to previous levels, the letter said.
“GM bondholders have been asked to make deeper cuts than other stakeholders: namely, to reduce two-thirds of our instruments’ principal and trade it for speculative securities that may, if the currently planned cost reductions and sales projections prove inaccurate, end up having little or no value,” they said. “All other parties involved in the restructuring process will walk away with far more.”
The advisers said bondholders are “disappointed” that neither GM nor the auto task force has responded to their proposal.
NO-LIMITS PARTNERSHIP: ‘The bottom line’ is that if the US were to have a conflict with China or Russia it would likely open up a second front with the other, a US senator said Beijing and Moscow could cooperate in a conflict over Taiwan, the top US intelligence chief told the US Senate this week. “We see China and Russia, for the first time, exercising together in relation to Taiwan and recognizing that this is a place where China definitely wants Russia to be working with them, and we see no reason why they wouldn’t,” US Director of National Intelligence Avril Haines told a US Senate Committee on Armed Services hearing on Thursday. US Senator Mike Rounds asked Haines about such a potential scenario. He also asked US Defense Intelligence Agency Director Lieutenant General Jeffrey Kruse
INSPIRING: Taiwan has been a model in the Asia-Pacific region with its democratic transition, free and fair elections and open society, the vice president-elect said Taiwan can play a leadership role in the Asia-Pacific region, vice president-elect Hsiao Bi-khim (蕭美琴) told a forum in Taipei yesterday, highlighting the nation’s resilience in the face of geopolitical challenges. “Not only can Taiwan help, but Taiwan can lead ... not only can Taiwan play a leadership role, but Taiwan’s leadership is important to the world,” Hsiao told the annual forum hosted by the Center for Asia-Pacific Resilience and Innovation think tank. Hsiao thanked Taiwan’s international friends for their long-term support, citing the example of US President Joe Biden last month signing into law a bill to provide aid to Taiwan,
China’s intrusive and territorial claims in the Indo-Pacific region are “illegal, coercive, aggressive and deceptive,” new US Indo-Pacific Commander Admiral Samuel Paparo said on Friday, adding that he would continue working with allies and partners to keep the area free and open. Paparo made the remarks at a change-of-command ceremony at Joint Base Pearl Harbor-Hickam in Hawaii, where he took over the command from Admiral John Aquilino. “Our world faces a complex problem set in the troubling actions of the People’s Republic of China [PRC] and its rapid buildup of forces. We must be ready to answer the PRC’s increasingly intrusive and
STATE OF THE NATION: The legislature should invite the president to deliver an address every year, the TPP said, adding that Lai should also have to answer legislators’ questions The Chinese Nationalist Party (KMT) yesterday proposed inviting president-elect William Lai (賴清德) to make a historic first state of the nation address at the legislature following his inauguration on May 20. Lai is expected to face many domestic and international challenges, and should clarify his intended policies with the public’s representatives, KMT caucus secretary-general Hung Meng-kai (洪孟楷) said when making the proposal at a meeting of the legislature’s Procedure Committee. The committee voted to add the item to the agenda for Friday, along with another similar proposal put forward by the Taiwan People’s Party (TPP). The invitation is in line with Article 15-2