DETROIT — A General Motors bankruptcy filing seemed inevitable Wednesday after a rebellion by its bondholders forced it to withdraw a plan to swap bond debt for company stock.
GM bondholders are owed about $27 billion, the largest chunk of GM’s roughly $58 billion in debt. They were offered a 10 percent stake to wipe out the debt, well short of the 58 percent they wanted.
GM has until Monday to complete a government-ordered restructuring that includes debt reduction, labor- cost cuts and plant closures. The company has received $19.4 billion in federal loans.
Colorado auto-industry insiders expect a bankruptcy filing as early as today.
“I think (President Barack) Obama will make the announcement like he did Chrysler,” said Tim Jackson, president of the Colorado Automobile Dealers Association. “He’ll say that everything is going well with Chrysler, even though it’s really not.”
GM recently notified more than 1,000 dealers nationwide it would not renew their contracts in 2010. In Colorado, Jackson has confirmed nine dealers were notified, and he estimates that 13 to 15 in Colorado were affected.
A GM bankruptcy would remove any guarantees those dealers had that they could stay open another 14 months and that GM would buy back their inventory.
Chrysler, which cut its dealers after it was in bankruptcy, gave its dealers less than a month to close.
“They (GM) are going to want to get out from under those dealerships before they get into a new company,” Jackson said. “These dealers don’t cost them any money; they make money.”
Still, Jackson expects GM and Chrys ler to cut even more dealers as the bankruptcies proceed.
News of the failed GM bond-exchange offer sent its shares down 29 cents, or 20 percent, to $1.15 in Wednesday’s trading.
John Pottow, a professor at the University of Michigan who specializes in bankruptcy, said it would be almost impossible for GM to evade Chapter 11.
“They said no. That’s it. They tried. That’s why they’re going to have to file for bankruptcy,” Pottow said.
GM spokesman Tom Wilkinson said the board will meet this week to decide its next move, but he would not say exactly when. He also would not say whether the company would soon file for Chapter 11, nor would he reveal what percentage of bondholders took the offer.
A GM bankruptcy would be the fourth-largest in U.S. history based on its $91 billion in assets, and the largest for an industrial company.
Denver Post staff writer Elizabeth Aguilera contributed to this report.
