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| GM > SEC Filings for GM > Form 8-K on 28-May-2009 | All Recent SEC Filings |
28-May-2009
Other Events
U.S. Treasury 363 Sale Proposal
As previously announced, GM's exchange offers for $27.2 billion of its unsecured public notes (the Notes) and the related consent solicitations expired on May 26, 2009 and the exchange offers will not be consummated. GM's Board of Directors will be meeting to discuss GM's next steps.
The U.S. Department of the Treasury (U.S. Treasury), GM's largest lender, has indicated to GM that if GM decides to seek relief under the U.S. Bankruptcy Code and seek bankruptcy court approval for the sale of substantially all of its assets pursuant to section 363(b) of the U.S. Bankruptcy Code, the U.S. Treasury currently anticipates that a new company sponsored by the U.S. Treasury (New GM) would agree to acquire such assets (the 363 Sale) from GM (following the 363 Sale, GM is referred to as Old GM) substantially on the indicative terms set forth below under the heading U.S. Treasury 363 Sale Proposal (the Proposal).
As provided in the Proposal, the U.S. Treasury has indicated that if holders of Notes of an amount satisfactory to the U.S. Treasury have provided (prior to 5:00 pm EDT on Saturday, May 30, 2009) statements of support satisfactory to the U.S. Treasury indicating that they will not oppose the 363 Sale (if conducted on terms substantially consistent with the Proposal), the U.S. Treasury currently would propose that New GM issue to Old GM as a portion of the consideration offered in connection with the 363 Sale 10% of the common equity of New GM and warrants to purchase an aggregate of 15% of the equity of New GM. The U.S. Treasury has indicated that if these statements of support are not received, the amount of common equity and warrants that it would propose be issued by New GM to Old GM would be substantially reduced or eliminated.
We have been informed by the advisors to the unofficial committee of unsecured GM Noteholders, Houlihan Lokey Howard & Zukin Capital, Inc. (financial advisors) and Paul, Weiss, Rifkind, Wharton & Garrison LLP (legal counsel), that the unofficial committee and other large Noteholders (who collectively hold approximately 20% in aggregate principal amount of the Notes) support the economic terms of the Proposal.
U.S. Treasury 363 Sale Proposal
363 Sale Pursuant to Section 363(b) of the U.S. Bankruptcy Code, (a)
GM and its debtor subsidiaries (collectively, the
"Sellers") would sell to New GM substantially all of the
assets of Sellers (other than certain specified assets) and
(b) New GM would assume certain specified liabilities of
the Sellers.
Following the 363 Sale, the U.S. Treasury contemplates
that:
• the approximately $27.2 billion principal amount of
Notes would ultimately comprise substantially all of Old
GM's debt and a significant majority of the total unsecured
claims against Old GM, although there can be no assurance
as to the ultimate amount of unsecured claims against Old
GM that might arise in the context of a Chapter 11 case,1
and
• if issued, the New GM common equity and warrants
described below would comprise a substantial portion of Old
GM's assets
Capitalization of New GM would be expected to have the following
New GM: capitalization:
Debt • Approximately $17 billion estimated total consolidated
debt (excluding debt related to GM's automotive supplier
financing program and warranty program), including
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• $8.0 billion of debt owed to U.S. Treasury2
• $2.5 billion of debt owed to new Voluntary Employee Beneficiary Association ("New VEBA")
• $6.5 billion of other debt
Perpetual • $9.0 billion cumulative perpetual preferred stock with preferred stock a 9% dividend per annum
• $2.5 billion issued to the U.S. Treasury2
• $6.5 billion issued to New VEBA
1 In the event the total allowed unsecured claims against Old GM exceed $35.0 billion the U.S. Treasury has agreed that New GM would issue up to an additional 2% of New GM common equity to Old GM.
2 A portion of the debt financing for New GM may be provided by the governments of Canada and Ontario in which case a portion of the perpetual preferred stock and common equity of New GM to be provided to the U.S. Treasury will be allocated to the governments of Canada and Ontario.
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Common equity The outstanding common equity of New GM would be allocated
as follows after consummation of the 363 Sale (without
giving effect to the warrants described below):
• 72.5% to the U.S. Treasury 2
• 17.5% to New VEBA
• 10% to Old GM
Warrants
Old GM Warrant 1
• Old GM to receive warrants to acquire newly issued
shares of New GM equal to 7.5% of New GM common equity
outstanding at closing, exercisable at any time prior to
the seventh anniversary of issuance, with an exercise price
set at the share price that would equate to an aggregate
equity value of $15 billion based on the shares outstanding
at closing, fully diluted for the issuance of such warrants
Old GM Warrant 2
• Old GM to receive warrants to acquire newly issued
shares of New GM equal to 7.5% of New GM common equity
outstanding at closing, exercisable at any time prior to
the tenth anniversary of issuance, with an exercise price
set at the share price that would equate to an aggregate
equity value of $30 billion based on the shares outstanding
at closing, fully diluted for the issuance of such warrants
New VEBA Warrant
• New VEBA to receive warrants to acquire newly issued
shares of New GM equal to 2.5% of New GM common equity
outstanding at December 31, 2009, exercisable at any time
prior to December 31, 2015, with an exercise price set at
the share price that would equate to an aggregate equity
value of $75 billion based on the shares outstanding at
issuance of the warrants, fully diluted for the issuance of
such warrants
Debtor-in-Possession The U.S. Treasury, by or through itself or New GM, together
Financing and U.S. Treasury with one or more non-U.S. governmental entities, will offer
Debt Reduction debtor-in-possession financing to Sellers to provide funds
for the wind down and liquidation of Sellers' remaining
assets.
Other than the $8.0 billion of debt owed to the U.S.
Treasury by New GM described above, all amounts owed by Old
GM, other Sellers or New GM to the U.S. Treasury under
existing debt (excluding debt related to GM's automotive
supplier financing program and warranty program),
debtor-in-possession financing or other financing to New GM
in connection with the 363 Sale would be equitized (such
equitized amount estimated to be in excess of $50 billion,
as compared to an equitization of at least $10.7 billion
contemplated by the U.S. Treasury Debt Conversion
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Noteholder Support The U.S. Treasury's proposal above with respect to the amount of New GM common equity and warrants currently proposed to be issued to Old GM is subject to holders of an amount of Notes satisfactory to the U.S. Treasury having provided (prior to 5:00 pm EDT, Saturday, May 30, 2009) statements of support satisfactory to the U.S. Treasury indicating that they will not oppose the 363 Sale (if conducted on terms substantially consistent with the terms described above). The U.S. Treasury has indicated that if these statements of support are not received, the amount of common equity and warrants that it would propose be issued by New GM to Old GM would be substantially reduced or eliminated.
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