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Treasury taps Lazard as GM’s adviser on stock offering

May 21, 2010

Treasury taps Lazard as GM’s adviser on stock offering

Detroit News Washington Bureau

Washington — The U.S. Treasury Department has hired New York investment bank Lazard Frères & Co. as its adviser on General Motors Co.’s initial public stock offering.

The Treasury posted its 35-page contract with Lazard Friday afternoon; the contract was signed Monday. Lazard will advise Treasury on selling its stake in GM.

The government owns 61 percent of GM, which it swapped for about $43 billion of the $50 billion that was loaned to the automaker. GM has repaid its $6.7 billion in loans.

Lazard will receive a monthly $500,000 fee for the first 12 months; the advice may also cover the Treasury’s investments in Chrysler Group LLC, and Ally Financial Inc., formerly GMAC Inc. If a sale is not completed in 12 months, the fee will be reduced to $250,000 per month.

The news came as Chrysler CEO Sergio Marchionne said the company could attempt a public stock offering in 2011.

The Treasury’s agreement says Lazard is charged with valuing the government’s assets, offering advice on potential transactions and analyzing the various alternatives for disposing of the assets. When GM released first quarter financial results Monday, the company said it would go public when it was ready but has provided no firm timetable.

"The IPO will happen in good time, when the company’s ready and when the market’s ready," GM CFO Chris Liddell said as GM reported an $865 million profit for the first three months of the year — its first quarterly profit since 2007.

It will take the Treasury at least two years to divest all of its GM holdings before the government exits the Detroit automaker. Advisers have said it will require three separate sales with a six-month period between sales.

At current bond prices, the Treasury could lose around $10 billion of its $50 billion investment in GM.

Others also want to sell their GM stakes, including the United Auto Workers’ health care trust, which holds 17.5 percent of the automaker, and the Canadian and Ontario governments, which hold 12 percent.

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