GM Bankruptcy Prospects Still Loom

Updated from 11:25 a.m.

Analysts are still beating the bankruptcy drum for General Motors(GM), saying it is unlikely stakeholders will make needed concessions outside of court.

GM shares on Friday were trading down 41 cents to $1.59, or 20.50%. CNBC reported it was a 71-year low for the Detroit icon, and that its market capitalization fell below $1 billion.

In the three days since the automaker submitted its viability plan to the U.S. Treasury, KDP Investment Advisors and Moody's have reiterated their belief that the risk of bankruptcy remains high, even as GM continues to minimize the benefit of filing. Meanwhile, a Standard & Poor's equity analyst says GM shares are worthless whether or not a filing occurs.

Analysis	Discussion	Stock Rating
The Dow Needs Some Radical Changes Add comment	Is GM Going to Make It? Add comment	SELL (Get Report)

Credit analysts say it is unlikely that either holders of $27 billion in unsecured debt or the United Auto Workers will willingly sign on to proposed deals to trade debt for equity. Nevertheless, these deals are assumed in the viability plan.

In the case of GM's obligation to provide $20 billion in funding for the Voluntary Employee Beneficiary Association health care trust for retirees, the exchange would mean that the UAW would take half in cash and half in stock. Unsecured bondholders, meanwhile, would have to take a third of their debt in cash and two thirds in equity.

In a report issued Thursday, KDP analyst Kip Penniman, says the chances that GM can get the concessions it needs outside of bankruptcy "are essentially zero." Only a judge can force the needed solutions, he says. Among the problems Penniman sees: bondholders are being asked to sacrifice more than the union, and secured lenders would set a dangerous precedent if they voluntarily sacrifice collateral for super-priority loan status.