We all knew this was coming, but now it's official, GM to file for bankruptcy on June 1st.
General Motors Corp., the world’s largest automaker until its 77-year reign ended in 2008, plans to file for bankruptcy protection on June 1 and sell most of its assets to a new company, people familiar with the matter said.
The U.S. Treasury will provide financing for GM while the asset sale is arranged to a company formed by the government, according to a regulatory filing today. June 1 was the deadline set by the U.S. for GM to restructure outside court.
GM, which would follow Chrysler LLC into bankruptcy, plans to build a new business around assets such as the Cadillac and Chevrolet brands. The 100-year-old automaker, a victim of tumbling sales, fell short in a bid to cut debt by $44 billion by June 1.
What is new is this idea that GM will sell most of it's assets to a new company. Does that imply liquidation or some sort of bizarre loophole for complex restructuring?
Note that GM had credit default swaps protecting it's bonds:
Credit-default swaps protecting the automaker’s bonds for five years fell 1 percentage point to 89 percent upfront, according to broker Phoenix Partners Group. That’s in addition to 5 percent a year, meaning it would cost $8.9 million initially and $500,000 annually to protect $10 million of debt.
Bloomberg is reporting this is the 3rd largest bankruptcy in U.S. history.