Failing to reduce debt, GM bankruptcy looks inevitable[SIZE=-1]General Motors? last domino may have fallen: The company has lost a bid to get its bondholders to agree to a government-prescribed restructuring plan, according to GM, and reported by Automotive News and Reuters.
Before Chrysler filed for bankruptcy last month, it was that company?s bondholders who also rejected its restructuring deal.
Under GM?s plan, the bondholders would have received 10 percent equity in the company in exchange for their billion in debt. GM needed the agreement of 90 percent of its bondholders. Wednesday morning, GM announced that the offers to exchange $27.2 in unsecured public notes had expired.
The impasse paves the way for GM to file for Chapter 11, before a government-imposed deadline next Monday. It would be the largest industrial bankruptcy in history.
Analysts had been expecting the news for weeks.
If or when the company does declare bankruptcy, payments to consumers for legal claims based on GM products may be stayed by the bankruptcy court. Consumers who buy a GM vehicle could be left with less legal protection than other automakers would be required to provide.
Warranties, however, will be honored. Even in the unlikely event the company has to be liquidated the federal government as agreed to back warranties for consumers who buy GM vehicles during restructuring.
We will continue to monitor this fast-moving story, reporting here in the Cars blog and also updating advice and news on the Auto Crisis hub.
?Eric Evarts
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