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Bankruptcy on the horizon for General Motors Corp.

2009-05-27 15:56:05 (GMT) (Caymanmama.com - Automotive Top Stories News)

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General Motors

Fresno, California (CaymanMama.com) — The situation looks bleak for struggling automaker General Motors Corp., as a bankruptcy filing seems inevitable after a revolt by the company’s bondholders forced GM to withdraw from a plan to change out bond debt for stock.

GM’s Monday deadline requires the automaker to complete a government-mandated restructuring which consists of debt reduction, labor cost reductions and plant closures.

However, a Chapter 11 reorganization is highly probably after General Motors said its offer to swap $27 billion in unsecured debt for 10 percent of stock had failed. GM has accepted some $19.4 billion in federal loans.

Upon the breaking news that the GM bond exchange failed, shares dropped 12 cents, or 8.3 percent, to $1.32 in morning trading.

John Pottow, a professor at the University of Michigan who concentrates on bankruptcy, said General Motors evading Chapter 11 now is almost out of the question.

“They said no. That’s it. They tried. That’s why they’re going to have to file for bankruptcy,” Pottow said.

According to the Associated Press, “GM spokesman Tom Wilkinson said the board will meet later this week to decide its next move, but he would not say exactly when. He also would not say if the company would soon file for Chapter 11, nor would he reveal what percentage of bondholders took the offer.”



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