GM Solicits Debtholders in Its Effort to Revamp

RDX : 问题根本不是改变债权结构就能改变的 也不是输血就可以搞定 这家公司会破产

General Motors Corp. is trying to lure some of its debtholders into exchanging debt for equity, as it tries to steer clear of a Chapter 11 bankruptcy-law filing, people familiar with the plan said.
[Wagoner Jr, Richard]

Rick Wagoner

Chief Executive Rick Wagoner and top lieutenants are scrambling to assemble the business plan they need to deliver to Congress by Tuesday. The plan needs to prove the car maker can remain a viable company amid bleak market conditions. GM will argue that with a short-term loan from the government, along with agreements with creditors and unions, it can reshape itself into a leaner entity.

That plan, yet to be approved by GM's board, is expected to include details on how GM will lighten its debt obligations without the protection of bankruptcy court, these people said.

GM's board, set to meet this weekend, is expected to scrutinize the plan and play a role in crafting whatever document is submitted to Congress. A bankruptcy filing could cost Mr. Wagoner his job.

By agreeing with certain debtholders to take equity in exchange for existing debt, the auto maker could offer these investors an alternative to a bankruptcy filing. Many unsecured debtholders stand to absorb big losses on their investment. Access to equity could allow them to cash out of the company at a more attractive price. The proposition comes as the company's debt is trading at distressed levels.

GM's stock on Friday rose 8.9%, or 43 cents, to $5.24, in New York Stock Exchange composite trading.

"The terms will be very important," KDP Investment Advisors auto analyst Kip Penniman said. He said investors will ask "are they really going to fix this company or are we going to potentially be back in a bankruptcy situation in a couple of years."

Mr. Penniman said this type of maneuver could be critical to gaining government support, but if it isn't accompanied by strategy shifts, bondholders may balk.

GM has run through about $13 billion over the first nine months of the year due to restructuring expenses, weakness in global demand and other factors. The company is scrambling to cut costs and boost sales in order to maintain adequate liquidity through the end of the year.

A component of GM's survival is persuading the government to provide at least $10 billion to $12 billion in bridge loans to keep the company afloat through 2010. In addition, GM has been pressing banks, investors and other parties to help it as it looks to unload assets, raise financing and reduce its debt obligations.

"At a high level, we think interest expense reduction is needed immediately for cash flow improvement, but GM simply needs to reduce overall leverage," J.P. Morgan Chase & Co. auto analyst Himanshu Patel said in a research note in the past week. "This suggests principal reduction should be one of the primary drivers of debt restructuring."

GM's debt load, estimated by J.P. Morgan to total $43.3 billion at an annual interest expense of about $2.9 billion, has been a primary culprit in the company's deterioration in recent years. Many analysts have suggested GM needs to file for Chapter 11 bankruptcy-court protection in order to force creditors to renegotiate.

GM's blueprint is being put together as executives at Ford Motor Co. and Chrysler LLC also craft plans for Congress. Together, Detroit's three auto makers seek $25 billion in aid from the government, arguing that a lack of consumer demand and frozen credit conditions have wrecked restructuring efforts.

Mr. Wagoner is leading the GM team responsible for crafting the plan for Congress and will be present for hearings scheduled to take place Thursday and Friday.

Executive compensation cuts, a shrinking of the brand portfolio and a demand for additional union cost concessions are among potential moves the auto maker is considering. United Auto Workers officials couldn't be reached for comment.

GM's board has ratcheted up pressure on Mr. Wagoner in recent weeks, several people familiar with the matter said. While the company's lead independent director, George Fisher, supports the management team, more than a quarter of GM's 14 directors have privately expressed frustration with Mr. Wagoner, people close to the board said.

But the list of potential successors to Mr. Wagoner is short, with Chief Operating Officer Fritz Henderson being the chief candidate, these people said.

Mr. Henderson has been working with Mr. Wagoner to restructure GM for the past three years, and was a chief architect of merger negotiations with Chrysler majority owner Cerberus Capital Management LP, which ended this month.

One difference between GM's board and Mr. Wagoner's team is the approach toward a potential bankruptcy filing.

A week ago, GM said its board will consider all options, including a possible bankruptcy filing. Mr. Wagoner has said such an action isn't an alternative.