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Some Good News for ‘Government Motors’

The real risk to the future of General Motors (other than the unpopular vehicles) is that a bankruptcy and reorganization process would not be quick, in what’s

Anderson Patterson
News
Last updated: Jul 31, 2020 | May 28, 2009

The real risk to the future of General Motors (other than the unpopular vehicles) is that a bankruptcy and reorganization process would not be quick, in what’s called a 363 sale, but would go through a standard Chapter 11 reorganization, which could take several years. A long and drawn out reorganization would probably have an extremely negative impact on GM’s ability to continue selling cars. Selling cars being a key part of the GM business, this could easily lead to a total loss of viability and liquidation.

This, then, is good news:

General Motors said Thursday that a key group representing many of its largest bondholders had accepted a proposal offering up to a 25 percent stake in exchange for not opposing G.M.’s reorganization plan.

In a regulatory filing, G.M. also filled out many of the details of the reorganization plan, crafted under the eye of the Treasury Department.

Under the terms of the deal, G.M.’s bondholders would receive a 10 percent stake in the newly reorganized carmaker. They will also receive warrants to buy an additional 15 percent of a new G.M. if the company rises to a certain level of value.

It’s really quite a bit better for all involved for this to proceed quickly. Given the complexities of the GM case, a swift turnaround is still not a sure thing, but this obviously helps.

Anderson Patterson | Anderson is a video editor and developer who believes in the power of visual organization. He recently graduated from the University of Washington, where he concentrated on post-production during his studies. He was first exposed to the mystical world of visual art creation while watching his father edit advertisements when he was a child, and he has been working towards his dream of becoming a video editor ever since.

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