General Motors Corp on Saturday finished a key piece of business before a bankruptcy filing planned for Monday as the deadline for bondholders to accept an exchange offer brokered by the Obama administration expired.
GM would not comment on how many investors had expressed support for the debt-for-equity swap that would give them up to 25 percent of a reorganized company in exchange for $27 billion in bond debt.
Bondholders had until 5 p.m. EDT to register their support for the deal, which would give them up to 25 percent of a reorganized GM.
The new, sweetened deal for the bondholders -- a 10 percent stake in the reorganized GM and warrants for another 15 percent stake -- already had the support of investors representing at least 35 percent of GM's bonds.
Fund managers and analysts said it was possible that the bond offer could have attracted a majority of the GM bond investors by the deadline.
The warrants and the improved capital structure make for an improved recovery for bondholders, Barclays Capital analyst Brian Johnson said. In terms of the bankruptcy process, we expect the likely bondholder assent to smooth the process.
Under the new offer, bondholders would have a recovery of around 9 cents on the dollar, up from an estimate of zero to 5 cents under the previous offer, Johnson said.
GM bondholders last week rejected a proposal that would have given them a 10 percent stake in a reorganized GM.
The automaker on Friday got a boost when the United Auto Workers union (UAW) overwhelmingly ratified a new cost-cutting labor agreement with GM, clearing a major hurdle in the automaker's restructuring efforts.
GM is expected to file for Chapter 11 protection on Monday and President Barack Obama will likely discuss the next steps in its reorganization at that time.
The Obama team said on Saturday that they welcomed a deal clinched by Germany with Canadian auto parts group Magna, GM and the U.S. government to save German carmaker Opel from GM's imminent bankruptcy.
This deal is a positive step for the auto industry. The auto task force will continue its close engagement with the German government on the issue, a senior administration official said.
ON A DEADLINE
In late March, the Obama administration put the automaker on 60-day notice to restructure the company and clinch concessionary deals with its union and bondholders even as it pumped $19.4 billion in emergency funds to keep the company afloat.
The White House said on Friday that rival Chrysler's bankruptcy proceedings demonstrate the possibility of an orderly restructuring of a major U.S. carmaker and could be a model for GM.
Expectations that the automaker would file under Chapter 11 of the U.S. bankruptcy code rose after GM said Chief Executive Fritz Henderson would host a news conference Monday in New York.
A bankruptcy filing by GM would rank as the third-largest bankruptcy in U.S. history and one of the largest and most complex manufacturing bankruptcies.
GM's bankruptcy is likely to hurt the entire industry -- including rival Ford Motor Co and suppliers, many of whom are already struggling to survive as GM's purchasing budget runs to about $94 billion annually.
The real question is what's going to happen to the supply base now, Dennis Virag, president of Michigan-based Automotive Consulting Group, said.
A filing by GM could also hurt U.S. consumer confidence, which has been ticking up in the past few months, he added.
GM has struggled in recent years to compete, hurt by its truck and SUV-dominated vehicle line-up and a deep plunge in U.S. vehicle demand.
The automaker has lost $82 billion in the past four years even as it continued to cut excess production capacity, jobs and dispose of assets, including brands.
Since 2000, GM has slashed over 100,000 jobs in the United States and plans to cut another 19,000 U.S. jobs by 2012 to bring total U.S. employment to about 72,500.
(Reporting by Poornima Gupta and Kevin Krolicki; additional reporting by Matt Spetalnick and Walden Siew; Editing by Eric Beech and Patrick Fitzgibbons)