DETROIT – General Motors Corp. is preparing a tougher debt-for-equity exchange offer for its unsecured bondholders that could be presented as early as next week, according to people familiar with the matter.
The company is considering offering only equity, but no cash or new debt in GM, representing a significant reduction compared to an offer GM made about two weeks ago, The Wall Street Journal reported.
The auto maker is working on the new offer with intense input from President Barack Obama’s auto-industry task force members, many of whom are now stationed at GM’s headquarters in Detroit. Steven Rattner, the head of the task force, has said that GM bondholders need to be prepared to make significant concessions to save the 100-year-old auto maker.
GM had initially planned to launch the debt-for-equity offer by April 17, with the goal of having about $29 billion in unsecured bonds restructured before a $1 billion payment is due on June 1.
In late March, GM delivered an offer to unsecured bondholders that asked them to turn over about $29 billion in unsecured debt in exchange for 90 percent of the company’s equity, and about $5.6 billion in new debt and cash. Three days later, the Obama administration said GM needed to rework a viability plan it had submitted on Feb. 17, including its debt assumptions. CNBC reported earlier Thursday the company would offer bondholders an all-equity exchange.
A person briefed on the company’s plans said GM’s treasury office is now waiting on additional guidance from the Obama administration before it commits to a specific date to launch the exchange. Rattner told bondholders in early March that the government wasn’t going to honor their request to offer existing bondholders new debt that is backed by a government guarantee or insurance in case GM fails.
An ad-hoc committee representing the bondholders hasn’t been in formal negotiations with GM since the company’s initial offer on March 27, several people familiar with the negotiations said. Some of these bondholders have said they are open to discussing an all-equity deal, but are frustrated with the lack of response from GM and the Treasury Department.
An official with the Treasury Department familiar with the matter said the Obama administration will meet with the bondholders in the near future.
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