GM preps for Chapter 11 with new deals

While Chrysler was able to negotiate terms with most creditors and stakeholders relatively early in the Chapter 11 process, General Motors appears to have had more hitches. Owners of $27 billion in bonds have refused to sign onto the GM deal, which would give them a 10% stake in a new GM in return for slashing their claims against what was for decades the world’s largest automaker.

The UAW VEBA (Voluntary Employees Beneficiary Association), which was to receive billions of dollars for employee retirement costs in return for lower wages and removal of those costs from GM’s balance sheet, has agreed to getting 17.5% of the new company and $2.5 billion in promissory notes. The original deal with the UAW VEBA called for it to own 39% of General Motors’ equity. The government would temporarily hold most of the new company’s stock, in return for providing debtor-in-possession financing; the Treasury has already lent $19 billion to General Motors.