INTERVIEW-GM CFO 'limited' in options on bond offer

By Poornima Gupta
DETROIT, April 27 (Reuters) - General Motors Corp
said on Monday it was limited in its options to change the
terms of its new offer to bondholders who are being asked to
swap about $27 billion in unsecured debt for equity in a
restructured company.
The U.S. government does not support any higher offer for
GM's bondholders or for increasing the bondholders' stake in a
restructured GM beyond the proposed 10 percent, Chief Financial
Officer Ray Young said on Monday in an interview.
Moreover, there was no guarantee the debtholders would
receive the same offer if the automaker files for bankruptcy,
he added.
Young said debtholders need to evaluate GM's offer
thoroughly.
"What they are going to have to do is evaluate what 10
percent of common equity is worth in the future and compare
that to what potentially the recovery to the bondholders in the
event we have to go through a bankruptcy process," Young said.
In a filing with the Securities and Exchange Commission, GM
said it would offer 225 shares of its common stock for each
$1,000 principal of outstanding bonds.
Under the terms of the exchange, the bondholders would have
up to 10 percent of GM common stock, a level dictated by the
U.S. Treasury and current stockholders would have 1 percent.
GM, which last week took $2 billion of emergency U.S.
government loans to bring its total to $15.4 billion so far,
has until June 1 to cut debt, slash costs and reach a
concessionary deal with the United Auto Workers union.
Young said the company was encouraged by rival Chrysler
LLC's agreement with the union on retiree healthcare expenses.
"I suspect that, once we get into a room to really to begin
intense negotiations, we will arrive at some sort of structure
consistent with what we have outlined," Young said.
At stake is the future of some $20 billion in debt GM owes
into a retiree healthcare trust the automaker and the UAW
agreed to create as part of a cost-saving contract in 2007.
GM has pledged to pay $7.6 billion to the trust fund by
next year, but that is cash it does not have and cannot afford
to pay. As a result, negotiations are under way with the UAW
that would give the union GM stock instead of cash.
(Reporting by Poornima Gupta; Editing by Andre Grenon)
((poornima.gupta@reuters.com +1-313-967-1901; Reuters
Messaging: poornima.gupta.reuters.com@reuters.net))
Keywords: GM/CFO

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