GM Bondholders Report Says "Our Plan Best Chance"

DETROIT March 17, 2009; Nick Carey and David Bailey in Detroit and John Crawley in Washington writing for Reuters reported that advisers to bondholders of General Motors Corp said on Monday they have presented a framework plan to U.S. President Barack Obama's autos task force and the ailing No. 1 U.S. automaker that provides the company's best chance for an out-of-court restructuring.

In a statement, advisers to the ad hoc committee of GM bondholders said the framework plan for a debt-to-equity exchange was "consistent with the government's restructuring requirements under the terms" of emergency government loans provided to the automaker.

"It (the framework) provides the best chance ... of completing an out-of-court restructuring by securing a high level of acceptance among a diverse group of GM bondholders -- from mutual funds to pension funds to retail bondholders," the statement added.

The plan, which was presented to the autos task force and GM several weeks ago, "is one of several options on the table that seeks to achieve a successful out-of-court restructuring," the statement said.

The statement from bondholders came the same day task force adviser Steve Rattner was quoted in a Detroit Free Press newspaper interview as saying bondholders were being "quite difficult" in talks intended to cut GM financing costs.

Rattner also was quoted as saying the United Auto Workers had been "very constructive" in talks with GM and Chrysler over restructuring payments due union retiree healthcare trusts.

Rattner also told the newspaper that bankruptcy was not the task force's goal, saying it was "never a good outcome for any company, and it's never a first choice."

A representative from Treasury could not be reached immediately for comment.

GM Chief Executive Rick Wagoner was in Washington on Monday to meet with task force members, according to a person familiar with the meeting who was not authorized to speak publicly. The meeting was described as ongoing fact-finding by the panel.

Wagoner also met with the German Economy Minister Karl-Theodor zu Guttenberg on Monday night. Guttenberg told reporters after the talks that GM appeared willing to help Europeans in saving the automaker's Opel Unit.

Guttenberg, in Washington ahead of a meeting Tuesday with U.S. Treasury Secretary Timothy Geithner, said it was essential for GM to find a private investor. One scenario could involve GM taking a minority stake.

Guttenberg said there were still many open questions that needed to be addressed.

Germany is open to the possibility of helping Opel but has said it needed to be sure no state support would find its way to GM, which is seeking more bailout help from the U.S. government to survive. Opel has said it needs financial support to survive.

GM bondholders face pressure under the terms of the automaker's bailout from the U.S. government to reduce by two-thirds the roughly $27 billion they are owed, through an exchange for new equity in a recapitalized company.

Bondholders have balked at those proposed terms, saying they are unfair given the payout terms being offered to workers represented by the United Auto Workers union and the remaining debt at GM.

GM and No. 3 U.S. automaker Chrysler LLC -- 80 percent controlled by private-equity firm Cerberus Capital Management LP -- face a March 31 deadline when the autos task force must decide whether the companies can be restructured successfully.

GM has received $13.4 billion in emergency government loans and Chrysler has taken $4 billion so far. Both automakers have requested additional billions of additional dollars in loans to help them stave off bankruptcy.