General Motors’ Appeal to Bond Holders Failed

General Motors, failed to save itself from bankruptcy after the deal to swap bonds for stocks fell through. The deal that was offered to bond holders on Wednesday would give out 10% of the company’s stocks in exchange for 27 billion dollars of bond debt. However, not enough bond holders came forward, instead choosing to leave GM to its apportioned fate. GM has until June 1, 2009 to complete a chapter eleven restructuring as ordered by the Us government ; however, that scenario seems very unlikely now. Although the number of bondholders who accepted is unreleased, the acceptance quota that had to be met in order to qualify for a US loan was 90%. GM shares tumbled lower as news of the failed deal hit the markets. GM stocks are trading at 1.21 at the time of this post.

I think the reason most bond holders did not accept the deal is because they either have bond insurance or feel that the amount of stock being offered is inadequate given the risks associated with the company. GM’s  bankruptcy would make it one of many companies to go down from this recession.