Ad Hoc Committee of General Motors Bondholders Proposes Plan to Save GM

NEW YORK--The Ad Hoc Committee of General Motors Bondholders today released its proposed plan to save General Motors (GM) and avoid a lengthy and difficult bankruptcy process that would hurt all stakeholders, employees and customers. This proposal will save US taxpayers $10 billion in cash, prevents the nationalization of one of the country’s largest companies and provides for a fair and equitable allocation of new GM equity across all stakeholder classes.

According to Eric Siegert, senior managing director of Houlihan Lokey Howard and Zukin and financial advisor to the Ad Hoc Committee, the bondholder proposal is reasonable and equitable and provides for all parties to share equally in the future of GM.

The proposal involves allocating new GM equity equally across the board to union VEBA and GM bondholders, pro rata to the level of financial obligation owed to each by GM. There would be no cash component in this proposed restructuring and the US Government would not own any equity. The union VEBA, based on the current $20 billion in health benefits obligations it owes to retirees, would own 41% of the new GM. Bondholders, as a result of their $27 billion of notes outstanding, would own 58% of the new GM. Current shareholders would retain 1% of the equity of the new GM.

“Freed of its obligation to make cash payments to the VEBA or bondholders, the US Government would not have to convert any of its $20 billion in loans to equity and dramatically reduce the need to make additional loans,” said Siegert.

“Our proposed restructuring is quite simple. We will save the American taxpayer $10 billion in cash that would have been spent under the Government’s proposed plan. We think that this is an extremely attractive proposition given our current fiscal crisis,” said Mr. Siegert.

Siegert continued, “Unlike the current proposal, our plan does not grant a controlling interest in GM to the federal Government. We do not believe that nationalizing one of America’s largest and most important companies is the right policy decision for our country. And finally, any reasonable person reviewing our plan would come to the conclusion that a completely fair and even allocation of new GM equity pro rata to the obligation that GM owes each stakeholder is the best way to resolve competing claims in an out-of-court process.”

Siegert said that the GM bondholders understand that sacrifice and pain is necessary to get to a fair solution of the current financial situation facing GM. That is why the bondholders have proposed to convert their entire claim to equity so long as others are willing to do so as well.

“We want to see GM emerge as a stronger and viable manufacturer, providing thousands of jobs and products that appeal to consumers around the world. While we have not seen the revised business plan being developed by the Company and the Auto Task Force (ATF), we commit to working constructively with all parties on a plan that sets GM on the right path forward towards a financially healthy, operationally sound competitor. We will present our ideas to the ATF this afternoon and look forward to an ongoing dialogue and an agreement that is fair and equitable to all parties. Time is of the essence, and we stand ready to engage with all the parties to get to a solution that works,” Siegert said.