Major GM bondholders OK revised deal

By Chris Isidore, CNNMoney.com senior writer

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NEW YORK (CNNMoney.com) -- The Treasury Department and a committee of major bondholders at General Motors have reached a deal that could give creditors a larger stake in GM than previously offered as long as they agree not to fight the government's plans for a quick bankruptcy at GM.

The agreement, revealed in a Securities and Exchange Commission filing by GM (GM, Fortune 500) early Thursday, would essentially give the bondholders 10% of the company but also give them the rights to buy an additional 15% of the company's stock at a low price.

The deal is unlikely to allow GM to avoid bankruptcy, however. If anything, it might clear away potential obstacles to the government's plans to use bankruptcy as a way to turn around the nation's largest automaker.

As part of such a filing, GM would emerge with only its more profitable plants, brands, dealerships and contracts. GM's unprofitable plants, contracts and other liabilities that the company can no longer afford would be left behind in bankruptcy court.

According to Thursday's filing, the new offer is structured so that the assets of GM that would remain in bankruptcy would receive a 10% stake in a "new GM" that would be used to pay bondholders. The old GM would also technically receive the right to buy the 15% stake in the new company that emerges from bankruptcy.

In the original offer to bondholders, which was soundly rejected earlier this week, creditors would only receive a 10% stake in a new GM.

The filing also disclosed that GM will not repay the loans it has already received from the government or much of the additional federal aid it will get as part of the bankruptcy.

The government has already given GM $19.4 billion to fund operations and cover losses this year, and total help is expected to exceed $50 billion.

GM will pay back $8 billion of that sum. The government will also receive $2.5 billion in preferred shares of GM that pay a dividend and are more similar to a loan than stock.

But more than $40 billion of federal help to GM will be converted into a 72.5% stake in the new company. This means that for taxpayers to make back any of the money loaned to GM, it will have to be because shares of the new GM increase dramatically in value following an exit from bankruptcy.

A trust fund run by the United Auto Workers union would also have a 17.5% stake in the new GM, as well as the right to buy an additional 2.5% stake.

Chrysler to lose $4.7B this year

By Chris Isidore, CNNMoney.com senior writer
May 4, 2009.


NEW YORK (CNNMoney.com) -- Chrysler LLC expects to lose $4.7 billion this year and to continue to lose money for the next two years, according to a filing from one of the company's top financial advisors.

Robert Manzo, a financial advisor hired by Chrysler for help with the company's bankruptcy process, estimated in the filing that the company will have cash expenditures far greater than losses for the next few years. Chrysler is estimated to go through about $15.7 billion this year as part of its restructuring.

The company filed for bankruptcy Thursday as part of a deal with the federal government, unions, some lenders and Italian automaker Fiat to keep the company from being shut down.

The filing also discloses the company lost $16.8 billion in 2008,. That's about the same as what larger rival General Motors (GM, Fortune 500) lost in 2008, excluding special items, and worse than the $14.6 billion lost by Ford Motor Co. (F, Fortune 500) last year.

Manzo's filing forecasts that Chrysler will lose about $900 million in 2010 and another $300 million in 2011, before finally reporting a $100 million profit in 2011.