Thursday, May 28, 2009

Bankruptcy filing likely as GM equity-for-bonds swap fails

General Motors Corp.'s bid to have its bondholders exchange their holdings for company stock failed to attract enough support, the company said Wednesday, making a bankruptcy filing all the more likely.

GM wanted bondholders, who own about $27 billion US in unsecured debt, to take a 10 per cent stake in the company.

The U.S. government has already put up $19.4 billion in loans to GM, and the Obama administration had said that 90 per cent of the bondholders had to accept the swap deal as a condition of GM getting more public money.

The troubled automaker has a June 1 deadline from the U.S. government to complete restructuring or file for Chapter 11 bankruptcy protection.

The company said its board of directors will be meeting this week "to discuss GM's next steps in light of the expiration of the exchange offers."

The failure of the debt-for-equity plan means the U.S. government could wind up with more than the 50-per-cent stake that was originally envisioned. The U.S. government's stake could now grow to 69 per cent.

The government of Canada is also in line to get a small equity stake in GM in return for lending the company money.

Members of the Canadian Auto Workers union earlier this week approved a new cost-cutting labour deal with GM Canada.