San Jose Bankruptcy Attorney Discusses G.M. Bankruptcy
San Jose Bankruptcy Attorney Discusses G.M. Bankruptcy
Now that sister company Chrysler has filed for Chapter 11 Bankruptcy, the US is waiting to see what General Motors will do. The question everyone is asking is will GM file for bankruptcy too? GM released their first quarter results which stated that GM lost $5.9 billion (excluding special accounting items) for the first three month period ending in March. GM had a 47 percent drop in revenue compared to the same quarter in 2008. GM built 903,000 fewer cars than it did for the same quarter of last year. This makes GM look less likely that it will survive instead of more viable because it is doing worse now than it did last year. All this is after GM had received almost $15.4 billion in federal loans as government bailout. At this time, GM has about $11.6 billion dollars in cash which should be just enough to keep operating and paying bills. GM spent $10.2 billion dollars of its cash reserves in the quarter which amounts to about $113 million dollars a day.
GM would be expected to file a Chapter 11 Bankruptcy to allow it to continue operating while trying to restructure its debt. GM would have to come up with a payment plan or restructure of debt to its creditors for approval. The Bankruptcy Court is unlikely to require an 100% requirement for the plan. This would create a very ugly battle for GM’s creditors as they would not have to be all treated equally. If enough of the creditors are wooed by a favorable plan, the “holdout” creditors may end up with pennies on the dollar. As a side note, GM bondholders are being offered GM stock in an effort to reduce the its debt load although very few people realistically believe GM will get enough converts to reached a manageable level of debt.
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