Feds May Trade Debt for Stake in 'New' GM

Insiders say government planning to trade some of $13.4B loan for equity
By Rob Quinn,  Newser Staff
Posted Apr 14, 2009 5:35 AM CDT
Feds May Trade Debt for Stake in 'New' GM
"Good," profitable assets, including the GMC brand, would form a streamlined version of GM after bankruptcy.   (AP Photo/General Motors)

The Obama administration is considering trading some of GM’s $13.4 billion government debt for equity in the streamlined, post-restructuring version of the automaker, Bloomberg reports. Insiders say the move, which would be accompanied by an offer to bondholders of equity in the new entity, is part of a plan to cut GM's debt ahead of a June 1 deadline to demonstrate its viability.

The administration plans to deflect accusations of socialism by selling off its stake as soon as it can, but analysts believe a buyer may be tough to find. The feds taking a stake "means you essentially have a nationalized General Motors until such time as the government sells off its equity to someone else, which won’t happen for a while," said one analyst.
(More auto industry stories.)

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