As part of its homework for the government, GM is hoping its debt holders will accept some kind of haircut on what they’re owed. A Morgan Keegan analyst expects the company to offer to renegotiate debt to 25 cents on the dollar, or to put another way, a 75% discount to face value.
As Bloomberg notes, GM debt currently trades between 13 cents and 22 cents on the dollar. That looks like a small premium, but then you have to figure that post-bailout GM still would be a pretty sickly company, and it’s unlikely to have a government guarantee on its debt (like Goldman Sachs gets).So who knows where the debt would actually trade.
GM’s board plans to meet at the end of the month to look over its term paper before submitting it to Professors Reid and Pelosi.
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