*GM to issue up to 60 billion shares to swap for debt
*Current stockholders would get 1 pct of new company
*Plan would proceed with approval from U.S. Treasury
(Adds detail from SEC filing, quote from GM CEO, byline)
By Kevin Krolicki
DETROIT, May 5 General Motors Corp (GM.N) on
Tuesday detailed plans to all but wipe out the holdings of
remaining shareholders by issuing up to 60 billion new shares
in a bid to pay off debt to the U.S. government, bondholders
and the United Auto Workers union.
The unusual plan, which was detailed in a filing with U.S.
securities regulators, would only need the approval of the U.S.
Treasury to proceed since the U.S. government would be the
majority shareholder of a new GM, the company said.
The flood of new stock issuance that could be unleashed has
been widely expected by analysts who have long warned that GM's
shares could be worthless whether the company restructures out
of court or in bankruptcy.
The debt-for-equity exchanges detailed in the filing with
the Securities and Exchange Commission would leave GM's stock
investors with just 1 percent of the equity in a restructured
automaker, ending a long run when the Dow component was seen as
a bellwether for the strength of the broader U.S. economy.
GM shares closed on Tuesday at $1.85 on the New York Stock
Exchange. The stock would be worth just over 1 cent if the
first phase of GM's restructuring moves forward as described.
Once GM has issued new shares to pay off its debt to the
U.S. government, bondholders and its major union, it said it
would then undertake a 1-for-100 reverse stock split.
Such a move would take the nominal value of the stock back
to near where it had been before the flood of new shares. But
in the process, GM's existing shareholders would see their
stake in the 100-year-old automaker all but wiped out.
The automaker said it expected to draw another $2.6 billion
from the U.S. Treasury before a June 1 deadline set by the
Obama administration for it to reach agreements with all of its
That borrowing would take GM's debt to the U.S. government
to $18 billion, and the automaker said it expected to have to
borrow a total of nearly $27 billion.
GM has asked its three major creditor groups to write off
at least $43 billion in debt in exchange for ownership of a
By contrast, the current market value of GM's current 610
million shares is about $1.7 billion.
The stock has lost about 43 percent of its value since the
start of the year.
GM bondholders, who are owed $27 billion, have also been
offered new stock in exchange for writing off debt in a bond
exchange the automaker launched last week.
The automaker is targeting a debt-reduction of at least $24
billion of its bond debt under the plan and has warned that it
could be forced into bankruptcy if that cannot be achieved.
Representatives of GM bondholders, who would be given a
10-percent stake in the new company under the automaker's
restructuring, have said they are being offered an unfairly low
payout. They have asked instead for a majority stake in the
But GM has asked the U.S. autos task force to accept a
majority stake in a new GM in exchange for at least half of the
government debt that the automaker has run up over the past
Chief Executive Fritz Henderson said on Tuesday that the
U.S. Treasury, which oversees the task force, was continuing to
evaluate the company's restructuring plan and its progress.
"The Treasury will continue their evaluation through the
month, which is fine. But we're not waiting, we're
implementing. The bond exchange needed to be launched when we
launched it," Henderson said. "Now we'll have to see."
In its filing, GM said it was in "ongoing discussions" with
the U.S. Treasury on its proposal to swap government debt for
equity in the largest U.S. automaker.
Finally, GM is negotiating with the UAW and is seeking to
get the union to take GM stock in exchange for $10 billion owed
to a trust fund for retiree healthcare.
Those talks were set to resume this week in Detroit,
GM said in its SEC filing that its three-pronged effort to
slash debt could take its total authorized share issuance --
including new and existing shares -- to 62 billion shares.
(Reporting by Kevin Krolicki; editing by Carol Bishopric,