GM is peering over the edge of the brink of default now.
GM presented its final offer today. 90% of the bondholders must accept their final offer or they go into Chapter 11. Liveblogging comments are available here
Regardless of whether the company goes into bankruptcy, Pontiac is history. (I bought an Oldsmobile about a week before they dumped that brand in 2001 – and my car dealer is long ago out of business – the Chevrolet dealer who last repaired my car is also now out of business).
Hummer is going to be sold off, Saturn – which was going to be GM’s prototype for the future way to do business – is going to be shut down unless they can sell it.
The interesting question from the news conference is – some of the bondholders surely have credit default swaps that will be triggered if GM files chapter 11 – so the bondholders are motivated to vote against the plan, which will trigger the CDS and the lenders get their money back.
Looking forward to the next question, which companies are on the hook having sold those GM Credit Default Swaps – and will they fail when they have to pay off on the bet? Or are they companies like AIG already on the Geithner bailout bandwagon?
This Bloomberg story contains a quote from a bond analyst in Vermont says the plan seems to be designed to ensure that it fails. If adopted, GM’s common stock would be 89% owned by the UAW’s health insurance fund, the bondholders would have 10% equity, and the current GM stockholders would have the remaining 1%.