General Motors and the United Auto Workers last week hammered out a tentative contract deal that could pave the way for the automaker to meet the June 1 deadline to restructure its debt and avoid filing for bankruptcy.
Details of the plan won’t be released until the deal is ratified by union members.
GM has until June 1 to persuade bondholders to buy up $27 billion worth of company debt. Many bondholders are critical of the plan, which allows them to receive 225 shares of General Motors stock in exchange for each $1,000 worth of debt, said the New York Times.
The automaker needs 90 percent of shareholders to agree to those terms, which most analysts say is very unlikely.
“I’m convinced that they have no choice but to file bankruptcy. To the extent that you have constituencies with whom you’ve made an agreement prior to filing, it makes the outcome that much easier to achieve,” Scott Peltz, managing director at accounting and consulting firm RSM McGladrey in Chicago, told Reuters.
GM received $15.4 billion in government loans to stave off collapse until the company met restructuring guidelines set by the Obama administration. Under a new restructuring plan, the U.S. Treasury would control at least 50 of the automakers’ stock and a health care trust for union retirees would have a 39 percent stake, said the Times.
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