I know we have been pounding the topic of Distressed Debt Exchanges into a pulp on this blog. But there is a reason for that. They are going to be happening with such frequency in the coming years as levered entities try to "solve" their problems with a coercive exchange (one defined as threatening Chapter 11). The big news this morning is GM's Debt Exchange. You can find it here: GM Debt Exchange. I just finished reading the exchange offer. Here is an executive summary of the press release:
- Commencing exchange for $27B of unsecured notes
- Exchange is vital to restructuring out of court
- 225 shares per $1,000 of bond principal.
- Cash will be paid out for accrued interest. According to the press release, USD interest accruals range anywhere from $7.5 per $1000 bonds (less than a 1 point) to $43 per $1000 bonds (4.3 points)
- If GM does not receive enough exchange by June 1, 2009, will file for bankruptcy
- Exchange expires 11:59PM, Tuesday May 26th
- Inserting a call option on non-USD notes
- Consummation is conditioned upon: Treasury approval (they believe they need 90% of principal to tender to get approval), U.S. Treasury issued 50% of pro forma common stock in exchange for cancellation of at least 50% of GM's outstanding treasury debt and cancellation of the Treasury Warrants, evidence that the Treasury will provide an additional $11.6B of funding that GM believe it will need after May 1st, 2009, VEBA modification (discussed more below), U.S. Treasury and VEBA ownership not more than 89% of Pro Forma stock, binding labor modifications.