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Last updated: May 28, 2009 7:17 pm
General Motors’ hopes of finding a faster exit from bankruptcy rose on Thursday after some of its biggest bondholders agreed to a sweetened 11th hour offer from the troubled carmaker.
Under the terms of the deal, the holders of $27bn of unsecured bonds would get up to 25 per cent of the restructured company, much more than the 10 per cent stake previously proposed.
News of the offer comes as GM’s board meets on Friday – and possibly Saturday – to finalise the filing planned to take place in New York on Monday.
According to people involved, the US government would provide more than $30bn in additional financing to fund GM’s operations during its expected stay in Chapter 11, with several billion dollars more expected from the Canadian government.
A committee of bondholders said on Thursday that “when contrasted with the alternative – uncertain and costly bankruptcy court litigation – it represents the best alternative for bondholders in the current difficult and dire situation”.
The move paves the way for GM to spend a shorter period in bankruptcy, in a fast-track process similar to that being used by Chrysler, which filed for Chapter 11 protection on April 30.
Separately, GM’s plans to spin off its European Opel/Vauxhall business struck an unexpected hitch when talks led by German Chancellor Angela Merkel on emergency funding to keep the operations afloat broke up in unusually public acrimony.
Berlin accused GM and the US Treasury of an “ambush” after a last-minute revelation that Germany would be asked to come up with an extra $415m that Berlin had understood would be coming from Washington.
Speaking after eight hours of talks that lasted through Wednesday night into Thursday morning, Karl-Theodor zu Guttenberg, Germany’s economics minister, expressed shock at news of the funding shortfall.
“I would have liked to see a more serious and conciliatory approach from the American side,” Mr zu Guttenberg said. “What happened overnight borders on the absurd.”
Germany warned Opel would become insolvent if a deal was not struck by Friday night.
Officials in Berlin were also offended that the US Treasury had not dispatched a senior representative, saying that the group had to interrupt proceedings to talk to more senior officials via videoconference facilities. The US rejected the accusations.
A senior US administration official said negotiations had resumed yesterday in a “more positive frame of mind” but stressed: “US taxpayer money cannot go to support Opel.”
Additional reporting by Tom Braithwaite in Washington
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