GM begins exchange offers for $27 billion of notes in last-ditch effort to avoid bankruptcy

By Angela McDaniels

Tacoma, Wash., April 27 - General Motors Corp. has begun exchange offers and consent solicitations for its unsecured public notes in the United States and will declare bankruptcy if the exchange offers are not successfully completed before June 1, according to an S-4 filing with the Securities and Exchange Commission.

The exchange offers will begin outside the United States once needed approvals from local jurisdictions are obtained.

GM said a successful exchange would reduce its liabilities to bondholders, the U.S. Treasury and its voluntary employee benefit association by at least $44 billion.

Full participation by the bondholders would result in them owning 10% of GM's pro forma outstanding stock. Current stockholders would be left with about 1% of the company's pro forma outstanding stock, and the remaining stock would be held by the Treasury and the voluntary employee benefit association.

The offers

The company is offering 225 shares of its common stock for each $1,000 principal amount of notes plus accrued interest.

At Friday's closing share price of $1.69 (NYSE: GM), those 225 shares would be worth $380.25.

The exchange offer will expire at 11:59 p.m. ET on May 26.

GM is also soliciting consents from noteholders to amend the terms of each series of notes and insert a call option to redeem the notes that are not denominated in dollars. The redemption amount for called notes would be 225 shares plus accrued interest.

The proposed amendments will delete the limitations on liens provisions, limitation on sale and lease-back provisions and consolidation, merger, sale or conveyance provisions.

They will also eliminate two events of default: failure to perform non-payment-related covenants relating to any of the agreements governing the old notes and some events of bankruptcy, insolvency or reorganization.

The company needs consents from holders of at least two-thirds of the outstanding notes to make the proposed changes.

Holders who tender will be deemed to have submitted consent.

In addition, by tendering their 1.5% series D convertible debentures due June 1, 2009, holders of those convertibles will agree to extend the maturity of their convertibles, waive all rights and redemdies and forbear from enforcing those rights if the exchange offers are extended beyond June 1. The maturity would be extended to the earlier of the termination of the exchange offers and the consummation of the exchange offers.

Conditions

Consummation of the exchange offers is conditioned on:

• The results of the exchange offers being satisfactory to the U.S. Treasury. GM believes at least 90% of the outstanding notes will need to be tendered in the exchange offers or called for redemption in order to satisfy the U.S. Treasury condition;

• Completion of the Treasury debt conversion. For this condition to be satisfied, GM must issue at least 50% of its pro form common stock to the Treasury in exchange for the full satisfaction and cancellation of at least 50% of GM's outstanding Treasury debt at June 1 - that 50% is currently estimated to be about $10 billion - and full satisfaction and cancellation of GM's obligations under the warrant issued to the Treasury as part of one of the Treasury loan agreements;

• The Treasury providing evidence of its commitment to give GM an additional $11.6 billion of funding that GM forecasts it will need after May 1;

• Binding agreements regarding modifications required by the Treasury loan agreements to a new voluntary employee benefit association established as part of a settlement with the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America.

This condition also requires that at least 50% (or about $10 billion) of GM's future financial obligations to the new voluntary employee benefit association will be extinguished in exchange for GM common stock and cash installments. The Treasury must also be satified with the modifications;

• The total number of GM shares issued under the Treasury debt conversion and voluntary employee benefit association modifications cannot exceed 89% of the pro forma outstanding GM common stock; and

• Binding agreements regarding labor modifications required under one of GM's Treasury loan agreements on terms that are satisfactory to the Treasury.

Bankruptcy options

The bankruptcy options the company is considiring if the exchange offers are not successful are:

• Seeking bankruptcy court approval for the sale of most or substantially all of its assets to a new operating company and a liquidation of the remaining assets in the bankruptcy case;

• Pursuing a plan of reorganization that GM would seek to confirm despite the deemed rejection of the plan by the class of holders of old notes; or

• Seeking another form of bankruptcy relief.

Eligible notes

The notes covered by the offer are GM's:

• $1 billion 1.5% series D convertible senior debentures due June 1, 2009;

• $1.50 billion 7.2% notes due Jan. 15, 2011;

• $48.18 million 9.45% medium-term notes due Nov. 1, 2011;

• $1 billion 7 1/8% senior notes due July 15, 2013;

• $500 million 7.7% debentures due April 15, 2016;

• $524.80 million 8.8% notes due March 1, 2021;

• $15 million 9.4% medium-term notes due July 15, 2021;

• $299.80 million 9.4% debentures due July 15, 2021;

• $1.25 billion 8¼% senior debentures due July 15, 2023;

• $400 million 8.1% debentures due June 15, 2024;

• $500 million 7.4% debentures due Sept. 1, 2025;

• $600 million 6¾% debentures due May 1, 2028;

• $39.42 million 4.5% series A convertible senior debentures due March 6, 2032;

• $2.60 billion 5.25% series B convertible senior debentures due March 6, 2032;

• $4.30 billion 6.25% series C convertible senior debentures due July 15, 2033;

• $3 billion 8 3/8% senior debentures due July 15, 2033;

• $377.38 million 7¾% discount debentures due March 15, 2036;

• $575 million 7¼% Quarterly Interest Bonds due April 15, 2041;

• $718.75 million 7¼% senior notes due July 15, 2041;

• $720 million 7½% senior notes due July 1, 2044;

• $1.12 billion 7 3/8% senior notes due May 15, 2048;

• $425 million 7 3/8% senior notes due May 23, 2048;

• $690 million 7 3/8% senior notes due Oct. 1, 2051;

• $875 million 7¼% senior notes due Feb. 15, 2052;

• €1 billion 7¼% notes due July 3, 2013; and

• €1.50 billion 8 3/8% notes due July 5, 2033.

• £350 million 8 3/8% guaranteed notes due Dec. 7, 2015 issued through General Motors Nova Scotia Finance Co.; and

• £250 million 8 7/8% guaranteed notes due July 10, 2023 issued through General Motors Nova Scotia Finance.

Based on the currency exchange rates on April 22, the number of shares to be exchanged is 292.8 per €1,000 principal amount of euro-denominated notes and 372.1 per £1,000 principal amount of pound sterling-denominated notes.

The exchange agent and the solicitation and information agent is D.F. King & Co., Inc. (800 769-7666 in North America or 00 800 5464 5464 in Europe).

Morgan Stanley & Co. Inc. and Banc of America Securities LLC are the global coordinators, Citigroup Global Markets Inc. and J.P. Morgan Securities Inc. are the U.S. lead dealer managers, Barclays Capital Inc. and Deutsche Bank Securities Inc. are the non-U.S. lead dealer managers, and UBS Securities LLC and Wachovia Capital Markets, LLC are dealer managers.

GM is a Detroit-based automaker.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.