A committee representing bondholders of General Motors has proposed an alternative plan to restructure the automaker, in which the bondholders, not the government, would be in the driver’s seat.þþUnder the proposal released Thursday, G.M.’s bondholders would receive 58 percent of the restructured company in exchange for tearing up their $27 billion in unsecured G.M. bonds. þþThe United Automobile Workers, through an entity known as a VEBA, which holds workers’ health care obligations, would get about 41 percent to offset the $20 billion G.M. owes the union. Current shareholders would receive 1 percent. þþThe government, which has given G.M. $15.4 billion in emergency loans, would receive no equity under the bondholders’ plan. Instead, it would remain a secured creditor of the reorganized company.þþ“This is certainly fairer in terms of how the equity is split,” Shelly Lombard, a bond analyst with the firm Gimme Credit, said. “It sounds like the union gets its entire claim exchanged into equity, and that’s a bigger risk than the last plan.”þþG.M. is hoping to avoid a bankruptcy filing by reaching an agreement for an out-of-court restructuring before a June 1 deadline imposed by Washington. þþUnder the proposal that G.M. made this week, bondholders would get 10 percent of the company for their unsecured debt, while the government would receive 50 percent in exchange for forgiving at least half of G.M.’s outstanding Treasury debt by June 1, which G.M. estimates would be about $10 billion. The VEBA would get 39 percent of the equity for giving up $10 billion of the $20 billion G.M. owes it, while current shareholders would get 1 percent.þþThe bondholder committee quickly rejected G.M.’s proposal, calling it “a blatant disregard of fairness.”þþThe committee said its counterproposal would save taxpayers $10 billion because the government would not be exchanging debt for new G.M. equity. The plan would put the burden on the VEBA instead, by forcing it to give up all its future claims in exchange for stock, which is barred under rules set up between the VEBA and G.M.þþ“We do not believe that nationalizing one of America’s largest and most important companies is the right policy decision for our country,” Eric Siegert of Houlihan Lokey Howard & Zukin, a financial adviser to the bondholders, said in a statement announcing the counterproposal.þþG.M. refused to comment specifically on the bondholders’ counterproposal and said through a spokesman that it was “proceeding with the tender and consent solicitations as outlined in the prospectus.”þþ
Source: NY Times
