GM says it probably won’t make $1 billion debt payment

GM says it probably won’t make $1 billion debt payment
 

Automotive News | April 22, 2009 – 1:40 pm EST

 

General Motors said today it probably won’t make a $1 billion debt payment due June 1.

Instead of making the payment, the automaker is hoping for a successful debt-for-equity exchange with its bondholders. If not, GM will seek bankruptcy protection to lower the unsecured debt.

"A successful bond exchange is an essential element of our out of court restructuring efforts, and we are working aggressively to launch an exchange," GM said in a statement.

"That exchange could still be in process on June 1. In which case, we would not expect to make the June 1st Series D bond payment. Should we be required to finish our restructuring within the court process, the June 1 bond payment would be unlikely as well."

GM CFO Ray Young told The Wall Street Journal today that GM will launch the debt-for-equity exchange in a few days to drastically cut the $28 billion debt load.

Echoing statements made last week by CEO Fritz Henderson, Young told the Journal that a bankruptcy is “probable” but that the company has the full support of the U.S. government.

“They want us to be a viable entity when we emerge,” he said on the sidelines of a Chinese auto industry summit. “We’re going to get this done.”

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