EXCLUSIVE-UPDATE 1-GM readies all-equity offer for debt-sources

* All-equity conversion for bondholder, UAW debt-sources
* Offer to convert all $48 bln of debt into equity-sources
* Treasury could convert its own loans to GM stock-sources
(Adds equity-based plan details, background from comments by
GM CEO)
By Soyoung Kim and Emily Chasan
DETROIT/NEW YORK, April 17 (Reuters) - The Obama
administration has directed General Motors Corp to
prepare a new debt restructuring plan that would convert all of
the $48 billion the automaker owes bondholders and its major
union into equity, people briefed on the plan said on Friday.
The U.S. Treasury, which has provided $13.4 billion in
emergency funding to keep GM operating since the start of the
year, has indicated that it could also convert those
taxpayer-backed loans into GM stock, the sources told Reuters.
GM plans to make the new proposals to bondholders and the
United Auto Workers union within the next two weeks, the
sources said.
The sources asked not to be identified because of the
confidential nature of the talks between the automaker and
President Barak Obama's autos task force, which is charged with
retooling the U.S. auto industry.
GM representatives could not be immediately reached for
comment. The Treasury Department had no immediate comment.
The proposals emerged after two weeks of intense talks
between the autos task force, headed by former investment
banker Steve Rattner, and GM executives in Detroit.
The proposed payout to GM's major union and its bondholders
in stock alone would represent much deeper concessions for both
groups than the terms they had been offered under the GM
bailout loans approved by the Bush administration.
"The task force was clear this was the best way for GM to
achieve success going forward," said one of the sources.
Under the terms of its former restructuring plan, GM had
aimed to cut its roughly $28 billion of bond debt by two-thirds
and convert half of the remaining $20 billion it owes to its
retiree health care fund in equity, rather than cash.
But the autos task force rejected that plan, saying GM
needed to cut more debt from its balance sheet in order to be a
profitable company.
GM Chief Executive Fritz Henderson, who assumed the top job
in late March when the Obama administration ousted his
predecessor, Rick Wagoner, told reporters on Friday that GM
management had spent the past two weeks working with U.S.
officials on a revised business plan.
That plan, which will include more job cuts and plant
closures, will be shared with bondholders and the union as
talks on the planned debt restructuring intensify in coming
weeks, he said.
It was still feasible for GM to avoid bankruptcy, but
Henderson said the automaker was also working on detailed plans
for a filing if it is forced to restructure under court
protection.
(Reporting by Soyoung Kim and Emily Chasan; writing by Kevin
Krolicki; editing by Leslie Gevirtz)
((soyoung.kim@thomsonreuters.com; Reuters Messaging:
soyoung.kim.reuters.com@reuters.net; +1 313 967 1903))

Keywords: GM/

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