Also Wednesday, fellow U.S.-based automaker General Motors Corp. (GM-N1.22-0.22-15.26%) is set to announce the results of a debt swap offer that could decide whether it can restructure out of court or will follow its Auburn Hills, Mich.-based rival into Chapter 11 bankruptcy protection.
Detroit-based GM gave the holders of some $27-billion (U.S.) of its bonds until midnight Tuesday to exchange their debt for a 10 per cent stake in a new GM, and said it will announce the results Wednesday morning. If bondholders representing 90 per cent of GM's unsecured debt -- about $24-billion -- didn't agree to the exchange, GM has said it will file for bankruptcy protection. Bondholders have balked at the proposal from the start, saying it gives them too small a stake for the amount they are owed.
Analysis from proprietary newsletter (no link available):
"A bankruptcy filing by General Motors Corp. appears inevitable after its bondholders rebelled, forcing the company today to withdraw a plan to swap bond debt for company stock.
GM faces a Monday deadline for completing a government-ordered restructuring that includes debt reduction, labor cost cuts and plant closures. But bankruptcy reorganization is likely after the company said bondholders rejected its offer to exchange $27 billion in unsecured debt for 10 percent of the company's stock.
GM has received $19.4 billion in federal loans, and President Barack Obama's administration has said it would provide more only if 90 percent of the bondholders, as well as unionized workers, agreed to concessions that slashed GM's costs.
The United Auto Workers union yesterday revealed it agreed to take a 20 percent stake in the company, down from the original plan of 39 percent. That seemingly freed 19 percent of the company's shares to sweeten the pot for its bondholders, fueling small hope that GM could avoid a bankruptcy filing.
But because the bondholder deal failed, the equity freed by the union now will apparently go to the U.S. government, which may have to commit billions more for the company's restructuring in court."
