GM back from the brink of bankruptcyMay 29th, 2009 - 4:09 am ICT by John Le Fevre
Giant US motor vehicle company General Motors looks like it will stave off bankruptcy after striking a deal with the federal government and bondholders.
Less than 24-hours after bondholders rejected an offer by the company to swap $US27 billion of debt for a 10 per cent share of equity in beleaguered auto maker, it has announced a fresh deal which will see the government take a 72.5 percent stake.
The deal, which bondholders have endorsed, could see the car giant receive for than $US50 billion in fresh federal funding.
GM has been kept afloat so far with $US19 billion in US taxpayer money is facing a deadline of Monday to come up with an agreed reorganization or face bankruptcy.
The Treasury Department “has indicated to GM that if GM decides to seek relief under the US Bankruptcy Code and seek bankruptcy court approval for the sale of substantially all of its assets… a new company sponsored by the US Treasury (New GM) would agree to acquire such assets,” it said.
The new proposal by the Treasury “provides incentives for GM’s unsecured bondholders,” who would have 10 percent of the “New GM” and the right to purchase another 15 percent, documents filed by the company said.
When bondholders rejected the first proposal, GM chief executive Fritz Henderson said bankruptcy was “probable”.
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