GM Said to Be Warned Government Won't Provide Aid for June 1 Debt Payment
April 1 (Bloomberg) -- General Motors Corp.ís 60-day deadline to
restructure is unlikely to be extended because the U.S. wonít repay $1
billion in convertible notes maturing June 1, according to a person with
knowledge of the discussions.
President Barack Obamaís auto task force told the biggest U.S. automaker
it doesnít want taxpayer funds used to repay debt maturities, said the
person, who declined to be identified because the talks are private.
Detroit-based GM has $1 billion of 1.5 percent convertible securities
coming due June 1. The debentures, issued in increments of $25, fell
$2.89 to $6.36 as of 3:26 p.m. in New York, which would be the lowest
closing price since December, according to data compiled by Bloomberg.
GM Chief Executive Officer Fritz Henderson yesterday said that June 1
was the final deadline for completing the debt restructuring and that
the automaker may enter bankruptcy sooner if itís clear an agreement out
of court isnít possible.
ďThe government has been very specific in providing a deadline by which
we have to complete this process and we plan to aggressively pursue them
in the next 60 days,Ē GM spokeswoman Renee Rashid-Merem said, declining
Obama gave GM 60 days to come up with deeper cost and debt reductions
than the carmaker proposed in its plan submitted in February. GM is
trying to prove itís viable, a U.S. requirement to keep $13.4 billion in
federal loans. The president believes a quick, negotiated bankruptcy is
the most likely way for GM to restructure and become a competitive
automaker, according to people familiar with the matter.
As part of its restructuring, GM must shrink $27.5 billion in debt by
getting bondholders to swap their claims for equity. The carmaker must
also reduce $20.4 billion in obligations to a union-run health-are fund.
Bondholders doubt a debt exchange will succeed outside of bankruptcy
because there isnít enough time under the administrationís deadline,
according to a person familiar with the thinking of the committee
representing creditors who declined to be named because the discussions
are private. A prepackaged bankruptcy is more likely to work, the person
Treasury spokesman Isaac Baker didnít immediately respond to an e-mail