General Motors Corp. doesn't want to file for bankruptcy. To that end, the company is soliciting support from its note holders.
In a 222-page plea sent to its investors, GM is offering to exchange each $1,000 principal amount of GM notes for 225 shares of GM common stock. In addition, the company will pay cash for all accrued but unpaid interest on the notes to June 1, 2009 -- the settlement date of the exchange offer.
"For the exchange offers to be successful," says the company, "we need to satisfy several conditions, including receiving the approval of the U.S. Department of the Treasury, which we believe will require, among other things, tenders from approximately 90% of the outstanding GM notes across all series."
In the event that GM does not receive enough tenders, it expects to seek relief under the U.S. Bankruptcy Code. According to the prospectus, that may include filing to liquidate (Chapter 7) or filing to reorganize (Chapter 11). "We are considering these alternatives in consultation with the U.S. Department of the Treasury, our largest lender."
(For more information on the subject of bankruptcy, read "Will OEM bankruptcies affect your dealership? No," by clicking on "Blog" on the www.moderntiredealer.com home page, then "B.O.B.")
GM lists the following advantages to restructuring out of bankruptcy court.
* It will enable the company to continue operating its business "without the negative impact that a bankruptcy could have on our relationships with our customers, employees, suppliers, dealers and others."
* It would "reduce the risk of a potentially precipitous decline in our revenues in a bankruptcy."
* It would allow the company to complete its restructuring "in less time and with less risk than any bankruptcy alternative."
For the year ended Dec. 31, 2008, GM recorded a $30.8 billion loss from continuing operations on net sales of $149 billion.
