Deal clears way for GM bankruptcy

Shareholders agree to stake in new GM for clearing debt before bankruptcy protection.

    GM is set to undergo bankruptcy proceedings for up to 90 days before re-emerging as a new firm [Reuters]

    Government aid

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    Last week, bondholders rejected a deal whereby they did not receive an additional 15 per cent of the new GM.

    The committee that convened on Sunday constituted 20 per cent of those accepting the deal.

    About 15 per cent of shareholders supported the initial deal and "approximately 19 per cent more indicated their support over the last few days," the group's spokesman said.

    He said that "975 institutions either sent support letters or gave us indications of support."

    About $20bn of government aid is keeping GM afloat at present, and it is to receive another $30bn as it restructures under protection to become a pared down and more efficient car manufacturer.

    Announcements expected

    The government would assume more than two-thirds control of the company is exchange for the latter aid.

    GM's debt

    GM's total liabilities of $185bn break down into:

    $27bn in unsecured debt
    $25.5bn in government and bank loans
    $20bn owed on healthcare and pensions
    $112.5bn in other debt

    Fritz Henderson, GM's chief executive, is expected to give a news conference and President Barack Obama is likely to speak about the firm's predicament separately on Monday.

    The bankruptcy protection would be the largest ever industrial Chapter 11 bankruptcy in US history if passed.

    The new GM is expected to include an alliance with Fiat, the Italian car manufacturer.

    An Obama administration official said on Thursday that the government expected GM to be in bankruptcy proceedings for between 60 and 90 days before it re-emerged as a new company.

    The US automobile industry has been hit hard by a slump in sales amid a US recession and a global financial crisis.

    SOURCE: Agencies


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