Bondholders appear to be ready to reject GM’s offer today. They will likely propose a counter-offer.
From the Detroit Free Press:
The bondholders said the offer was unfair, especially given the deal offered to the UAW for payments to its retiree health care trust fund. GM estimated the offer to the bondholders was worth about $3 billion, or roughly 11 cents on the dollar, while the UAW would receive a 39% stake in the new GM for cancelling $10 billion of the $20 billion GM owes the trust fund.
“We believe the offer to be a blatant disregard of fairness for the bondholders who have funded this company and amounts to using taxpayer money to show political favoritism of one creditor over another,” the committee said in a statement.
Under GM’s proposal bondholders would own about 10% of the company after a swap that would exchange $1,000 worth of debt for 225 shares. GM would then do a 1-for-100 reverse stock split that would reduce the number of shares held for each $1000 to just two shares. The federal government would increase the amount of bailout funds by $9 billion, bringing the total to $27 billion.