GM Generali

Generali (AQEU:GM)
Historical Stock Chart

From Jul 2019 to Jul 2024

General Motors Corp.'s (GM) small bondholders became the latest group to protest the auto maker's survival plan, gathering Wednesday to speak out against a debt exchange offer that would leave them with just cents on the dollar.

GM has said at least 90% of bondholders must agree to a debt-for-equity swap launched on Monday or else the company will be forced to restructure in bankruptcy court.

While they hold a small share of GM's debt - around one-fifth - relative to larger financial institutions, the strong negative reaction from individual bondholders underscores the challenge GM faces in getting its offer to succeed.

On Wednesday, a group of bondholders gathered the town center of Warren, Mich. to protest GM's plans. Several bondholders shared stories of how they came to own GM bonds. Organizers strove to strike a folksy tone with a guitar singer in the background and signs about saving "Main Street" investors.

"Bonds are a loan, they are not a speculative stock," said Chris Crowe, a retired electrician from Denver who said he'd been relying on GM bonds to send his son to college.

GM is asking bondholders to swap up to $27 billion in unsecured debt for a 10% company stake. If bondholders tender less than 90% of the debt, GM says it is prepared to file for bankruptcy protection.

Under GM's plan, the U.S. government, supporting the auto maker with $15.4 billion in loans, would get half its debt repaid. The United Auto Workers would get 40% of what GM owes for a retiree health care trust.

A group representing bondholders rejected the plan and said it would make a counteroffer.

The small bondholders' move to organize and make a case follows similar attempts by salaried retirees and auto dealers who would also lose big under GM's plan.

GM's current market capitalization of $1.28 billion implies holders of the company's bonds would get around half-a-cent on the dollar - well below the already distressed levels at which the debt trades. Optimistic scenarios put the equity's worth at 8 cents to 10 cents on the dollar.

A bankruptcy filing, however, could be much worse. There are many other claims on the company, and costly and time-consuming litigation could drain even more value.

-By Sharon Terlep, Dow Jones Newswires; 248-204-5532; sharon.terlep@dowjones.com.