General Motors Confirms It May Not Make $1 Billion Debt Payment
Date posted: 04-22-2009
DETROIT — General Motors on Wednesday said it doesn't expect to make a $1 billion debt payment due June 1, a significant sign that may be a precursor to a bankruptcy filing.
The federal government has made it clear that it will not assume any GM debt. GM faces a U.S. bankruptcy deadline of June 1.
GM is trying to engineer a debt-for-equity exchange with its bondholders. Without such an agreement, GM may have no choice but to file for bankruptcy. Bondholders may be given the chance to swap their claims for equity in a reorganized GM.
"A successful bond exchange is an essential element of our out-of-court restructuring efforts, and we are working aggressively to launch an exchange," said GM spokesman Tom Wilkinson in an e-mail response to a query from Inside Line regarding comments made by GM Chief Financial Officer Ray Young in The Wall Street Journal that the automaker couldn't make the payment deadline. "That exchange could still be in process on June 1. In which case, we would not expect to make the June 1st Series D bond payment. Should we be required to finish our restructuring within the court process, the June 1 bond payment would be unlikely as well."
Last week GM CEO Fritz Henderson said that an exchange offer is planned before the end of April.
Word of GM's anticipated inability to make a $1 billion payment to help cut a $28 billion debt load came as the Michigan Congressional delegation met at the White House on Wednesday to discuss the future of General Motors and Chrysler.
Inside Line says: More concrete evidence that GM is in an extremely precarious position. — Anita Lienert, Correspondent
