When it comes to negotiating with the automakers’ bondholders, it looks like Uncle Sam has learned a few things since the collapse of Chrysler.
As General Motors careens toward a likely bankruptcy on June 1, the government is playing hardball with creditors holding $27 billion in debt, demanding even greater concessions than were previously anticipated, sources tell The Post.
At a meeting in Washington Wednesday, creditors were told they will get even less of a stake in a restructured GM, according to people familiar with the talks.
Meanwhile, representatives of the United Auto Workers were told their hourly wages would have to be cut.
Members of GM’s ad-hoc creditor committee, which is represented by law firm Paul, Weiss, Rifkind, Wharton & Garrison and advisory firm Houlihan Lokey, were informed that bondholders may get far less than the 10 percent of a new GM that they were expecting, according to sources familiar with the matter.
It was a rude awakening for some creditors, who believed they were being summoned to Washington so that the government could offer up a new, more-favorable restructuring plan, said people briefed on the plan.
Unlike Chrysler’s debtholders, which included hedge funds, GM bondholders consist largely of mom-and-pop investors who own the car company’s debt through pensions or mutual funds. Given that fact, GM bondholders held out hope that the government would take a softer stance.
One creditor speculated to The Post that the government might be posturing in order to get bondholders to make greater concessions on terms.
According to GM’s original proposal to bondholders, labor unions would get a 39 percent stake in a new GM and the government would get a 50 percent stake. Existing shareholders would get the rest.
GM bondholders had originally proposed that they get a 58 percent stake in GM — a proposal that wasn’t accepted by the government, which had offered a 10 percent stake to the creditors.
In late April GM responded by offering to swap creditors’ claims for a 10 percent stake in the newly restructured company. At the time, some creditors scoffed, but now they’ll be lucky to get even that much.
GM and the government have been tussling with bondholders for months with the expectation that GM may be forced to file for bankruptcy before a government-imposed June 1 deadline for the company to come up with a viable restructuring plan.
At this point, GM is running on fumes, fueled by $15.4 billion in US loans that it’s using as it races to complete a restructuring. It’s hoping to cut $44 billion in costs.
GM CEO Fritz Henderson stated yesterday that the possibility of the Detroit-based company filing for bankruptcy is greater than ever.
Shares in GM fell 6 cents, or 5 percent, to $1.15. mark.decambre@nypost.com
