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GM Reveals Restructuring Plan Details

May 7th, 2009
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General Motors has outlined proposals to pay off its debts by issuing new shares that would effectively wipe out the holdings of its existing investors.

GM said in a Securities and Exchange Commission (SEC) filing: “There will be very substantial dilution to existing holders of GM common stock.”

The plans are subject to discussions with the US Treasury department.

Under the plans there will be a reverse share split, under which 100 of the old shares will be exchanged for one new share. Existing shareholders would end up with about 1% of the new shares. The plans would leave the Treasury holding 50% of GM’s shares.

GM has a June 1 deadline to restructure its business so that it can prevent it going bankrupt. It needs to issue the shares to fund government loans and to pay the healthcare costs of its retired workers.

It also hopes to halve its debts by persuading bondholders to swap $27bn (£19bn) of bonds for shares.

As part of the restructuring it plans to cut 21,000 US jobs this year and phase out its Pontiac brand, sell Saab and Hummer and restructure its European operations.

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