By Elise Craig
General Moters moved a step closer to bankruptcy on May 26th ?and a step closer to having Uncle Sam as by far its largest shareholder. GM’s bondholders rejected its offer to swap their debt for what they perceived to be too small a share of the equity that would remain. With GM facing a deadline of Monday, June 1st to complete a government-ordered restructuring, its chances of staying out of Chapter 11 are rapidly diminishing. For full details, take a look at this story on businessweek.com.
If GM does end up in bankruptcy, the U.S. and Canada could end up with three-quarters of the company’s stock. The Obama administration’s plan to lend the embattled automaker another $30 billion would make the U.S. government the company’s majority stakeholder, and make the bailout one of the biggest since the economic crisis began, as detailed here by the Washington Post. So far the federal government has given the company $19.4 billion in loans.
The United Auto Workers would also end up with a substantial stake in the restructured company. The union, which has agreed to extensive cuts in labor costs, would get 17.5% of the company to pay for worker and retiree benefits, as our colleagues David Welch and David Kiley report in this story on businessweek.com.