GM Bankruptcy Filing to Occur Today
By Kevin Miller
Government officials working for the Obama administration have confirmed that General Motors will file for bankruptcy protection today. The filing is expected to occur in a New York court, before the financial markets open for the day, with President Obama expected to detail the steps for GM’s turnaround by noon. On Sunday evening, the White House issued a statement, which proclaimed “Today will rank as another historic day for the company – the end of an old General Motors, and the beginning of a new one.”
The US government plans to grant the company $30 billion in loans, and will then gain a sixty percent stake in the restructured automaker. The governments of Ontario and Canada plan to provide an additional $9.5 billion dollars, and in return will themselves get a 12.5 percent stake in the company. Rounding out the ownership will be the UAW with 17.5 percent ownership, and bondholders with a ten percent share.
GM bondholders agreed to a debt-to-equity swap, which, gives them ten percent equity in the company, rather than the one percent they had been offered last week. There is the possibility of an additional fifteen percent equity stake in the company depending on its recovery and financial performance. Existing owners of GM stock will be left with no equity.
According to media reports, the plan is for a much smaller GM to emerge from bankruptcy proceedings, in just sixty to ninety days. The company’s bankruptcy filing is the third-largest in US history, and will lead to closure of eleven plants, and idling of three additional plants.
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