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Traverse City Record Eagle – General Motors and Chrysler, which have received $17.4 billion in federal aid and face upcoming deadlines to restructure their companies, will designate the auto parts suppliers that need the financing, giving them a large role in determining which suppliers will survive. Ford Motor Co., which has not sought the government aid, has said it does not intend to use the program.
The White House sent a team of 15 people to Detroit on Wednesday to work with GM over the next two weeks to accelerate the restructuring process, an administration official said.
Reuters – General Motors Corp on Thursday said its auditors had raised "substantial doubt" about its ability to survive outside bankruptcy if it fails to stem its losses and stop burning cash.
The "going concern" warning from the struggling U.S. automaker had been expected, but underscored the stakes for GM as it seeks up to $30 billion in U.S. government aid to restructure outside a court-supervised bankruptcy process.
GM’s shares dropped 15 percent to $1.87 in premarket trading.
GM said its creditors had agreed to waive a requirement that could have allowed them to force the automaker to repay more than $6 billion in loans because of the warning in order to allow GM to press its case for government aid.
Bloomberg – Chrysler LLC, needing lender concessions by March 31, isn’t negotiating with its banks because it can’t persuade them to discuss trading loans for uncertain equity, people familiar with the companies’ actions say.
Chrysler must reduce its debt by $5 billion by getting creditors such as JPMorgan Chase & Co. to trade debt for an ownership stake or by changing loan terms in order to be viable, the Auburn Hills, Michigan-based automaker said on Feb. 17 in a plan submitted to the U.S. Treasury.
Banks have little incentive to trade their loans, and the only other creditors Chrysler lists that could take more equity for debt are the U.S. government and the United Auto Workers union, which already has agreed in principle to reduce its obligation by 50 percent.
“It’s going to be a tough sell to get the banks to give up their position for worthless equity,” said Don Workman, a bankruptcy attorney at Baker & Hostetler LLP in Washington. “The best Chrysler can hope is that the government is going to force them to do it.”
The banks, which include Citigroup Inc., Goldman Sachs Group Inc., Morgan Stanley and JPMorgan, would be first to be repaid in the case of a bankruptcy. By taking equity in exchange for debt, the banks would lose that standing they now have. The caveat is that each of the banks has taken U.S. government aid from the Troubled Asset Relief Program and may be subject to Treasury’s influence, Workman said.
New York (HedgeCo.Net) – It doesn’t help matters when a company, who is at the forefront of a government bailout, is expected to provide rescue to another faltering company. But that’s exactly what General Motors has found themselves in the middle of, as Delphi is again turning to their former parent company for assistance.
GM is in talks to buy back some parts of the Troy, Michigan-based auto parts supplier, including some unprofitable plants. While this may help Delphi achieve the exit refinancing that they need to emerge from Chapter 11, it certainly doesn’t make things easy on GM, who is already set to receive over $13 billion in government aid. However, some believe that Delphi’s dependence could help GM’s case in requesting more federal funds.
Since Delphi filed for bankruptcy protection in October 2005, they have faced a string of disappointments in trying to secure the needed capital. A $6.1 billion refinancing plan, led by hedge fund Appaloosa Management, was supposed to provide the influx of capital. GM had also promised a $2 billion chunk of the puzzle to ensure Delphi met the minimum requirements. When the hedge fund backed out of the deal at the last minute, Delphi was left without an alternative.
GM has agreed to advance up to $100 million this month to Delphi, to keep the company running for the next few months. Delphi has until Feb 27th to restructure its exit plan, including an amended budget with payouts to creditors and how they plan on becoming profitable following the exit of Chapter 11 protection. They have also requested that the U.S. Bankruptcy Court allow them to halt their retiree medical benefits.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
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