Fra debito, ghiotti cedoloni da pagare ai preferred shareholders, costi generati per acquisire asset di Delphi e chiudere quella partita e mercato automobilistico USA ... la strada da fare non manca ...
General Motors Corp. Downgraded To 'D' On Bankruptcy Filing
-- We are lowering the ratings on General Motors Corp. to 'D' following the company's filing for Chapter 11 bankruptcy protection.
-- Recovery ratings remain unchanged pending further information from the bankruptcy proceedings.
-- The U.S. Treasury Department has indicated it will provide the bulk of debtor-in-possession financing through an approximately $33 billion facility.
NEW YORK (Standard & Poor's) June 1, 2009--Standard & Poor's Ratings Services today said it has lowered its corporate credit rating on General Motors Corp. to 'D' from 'CC'. We also lowered our issue-level ratings on the company to 'D'.
The rating actions were prompted by General Motors' filing for Chapter 11 bankruptcy protection on June 1, 2009, in New York. The U.S. Treasury Department, already GM's largest creditor, is expected to provide the bulk of debtor-in-possession (DIP) financing of $33 billion for GM. The Canadian government is reported to be providing a portion of the DIP financing.
In our view, today's bankruptcy filing marks the cumulative effect of many factors, including strategic missteps, high legacy costs relative to the reduced size of the current operations, overdependence on large vehicles for profitability, an inability to significantly alter customer perceptions of the company's product quality (despite evidence of improved quality in recent years), and, more recently, the sudden and dramatic decline in industrywide vehicle demand in the U.S. and around the world.
In recognition of these long-standing challenges, we lowered the ratings on GM out of investment grade on May 5, 2005. GM has been rated 'B' or lower for more than three years, even when the world economic situation was robust. We lowered GM's rating to 'CC' in December 2008.
We believe the filing was caused by inadequate liquidity because the company was unable to reach agreements with its bondholders to reduce debt outside of bankruptcy and otherwise satisfy the U.S. Treasury's terms for viability.
We expect GM to emerge from bankruptcy, but as a new entity in which the U.S. and Canadian governments, GM's principal labor union, and prepetition unsecured creditors will have a stake. According to GM and published reports, the U.S. and Canadian (and Ontario) governments will own 60.8% and 11.7%, respectively, of the common equity of the new GM entity, the main U.S. labor union (the United Auto Workers through a new VEBA trust) 17.5%, and the prepetition bondholders 10%.
We expect assets, liabilities, and operations that are not included in the new GM entity to be disposed of through the bankruptcy process over time.
The recovery ratings on GM's senior secured term loan and revolving credit facility remain at '1' and '2', respectively, indicating our expectation that lenders would receive very high (90% to 100%) and substantial (70% to 90%) recovery in the event of a default. The recovery ratings on GM's unsecured debt remain at '6', indicating our expectation that lenders would receive negligible (0 to 10%) recovery.
The recovery ratings are under review as a result of the bankruptcy filing, and if additional information becomes available that changes our assumptions, we will provide an updated recovery analysis.
We understand from published reports that GM will repay the senior secured lenders from its DIP facility.
GM has said it plans to use a Section 363 sale process in bankruptcy, through which a newly created GM entity will acquire assets of the old GM.
Pending approval of the bankruptcy court, GM expects the debt structure of the new, reorganized GM to include the following debt after the company emerges:
-- $6.7 billion owed to the U.S. Treasury;
-- $2.5 billion owed to a new retiree health care trust known as a Voluntary Employee Beneficiary Association, or VEBA;
-- $1.3 billion owed to the Canadian and Ontario governments; and
-- $6.8 billion of other debt (primarily international debt, but excluding
Europe).
In addition to the common equity ownership, GM said it expects the new entity to have $9 billion of preferred equity, including $2.5 billion owned by the U.S. Treasury and $6.5 billion owned by the new VEBA trust. The capital structure envisions more than $50 billion of existing debt owed to the U.S. government being converted into equity.
We understand that in advance of the bankruptcy, more than 50% of the prepetition unsecured lenders agreed to accept 10% of the equity plus warrants for additional equity in return for eliminating their debt and an agreement that they would not oppose the Section 363 sale.
In our opinion, the results of the bondholders' offer improve the odds for a relatively quick Section 363 sale and an emergence by the new GM entity within an unusually short time frame, perhaps as soon as early fall, based partly on the apparent speed of the proceedings in the simpler, but similar, Chrysler LLC bankruptcy case.
However, we believe the sheer complexity of the GM bankruptcy case-–the largest ever by an industrial manufacturer in U.S. history-–including potential objections from numerous parties, could result in delays that extend the process beyond the time frame expected by GM and the U.S. government.
Furthermore, we are concerned about the effects of GM's (and Chrysler's) widespread shutdown of its production facilities and near-term permanent plant closings on both the credit quality of the already beleaguered supply base and on GM's reorganization, despite well-publicized efforts to mitigate these problems.
Other issues we believe GM is working to resolve are the fate of former supplier Delphi Corp., which is in bankruptcy, and the plan to sell a stake in GM's European operations to a consortium that includes Magna International Inc. (BBB/Watch Neg/--).
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