'GM likely to file bankruptcy'

Posted By: Staff
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Washington, Apr 10: In the attempt to recoup, General Motors (GM) is again planning to negotiate a new deal with its bondholders to restructure its debt but it is most likely to file for bankruptcy.

"GM's restructuring could play out in one of two ways. It could successfully negotiate cost-cutting concessions with unions and bondholders so it can become viable outside of bankruptcy. Or, in the more likely scenario, it will reorganize by filing for Chapter 11 bankruptcy," the Wall Street Journal (WSJ) quoted a source on Friday, Apr 10

The Treasury Department is advising the GM to offer a 'small portion' of the company shares to its bondholders, observing that the new deal marked a 'sharp cut' from a bond-exchange proposal given by the company earlier. This deal is believed to be 'too generous to the bondholders'.

The new offer which may be presented in the coming week, may probably face resistance from the bondholders, reported WSJ. The plan will divide the company into a 'New GM' that would comprise of brands like Chevrolet and Cadillac while the 'Old GM' will be left behind with the brands that are facing problems.

The federal government has already provided financial help of 13.4 billion to the company. GM is expected to give the restructuring plan to the government by June, based on which additional federal aid will be provided.

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