Updated from 11:25 a.m.
Analysts are still beating the bankruptcy drum for
, 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%.
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.
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.
By contrast, a pre-packaged Chapter 11 bankruptcy would mean that "GM would be able to craft a new labor agreement in an expedited fashion, without a rank and file vote; create a new VEBA funding plan that reduces the cash demands on the company, potentially with backstop support from the U.S. government; commence a debt exchange that ensures 100% bondholder participation; forge a new legally-crafted agreement with its secured lenders, and cancel its existing equity," Penniman writes.
Moody's analyst Bruce Clark says the likelihood of a Chapter 11 filing by one or more U.S. automaker is around 70%. He notes that the government is a big investor, getting bigger: GM, which has already received $13.4 billion in loans, now wants at least $22.5 billion -- plus another $7.5 billion if its "worst case" scenario pans out, and even more if its pension plan funding is deemed insufficient.
, which has received $4 billion, wants $5 billion more.
"Given the significantly increased need for government support, Moody's expects that the U.S. Treasury is likely to be more insistent that each company's constituents, particularly creditors and the UAW, make substantive concessions as part of their restructuring programs," Clark wrote in a report. Because both parties are resistant, he says, the government "may in fact have to stand aside and allow one or more companies to make a Chapter 11 filing."
Meanwhile, S&P equity analyst Efraim Levy writes that regardless of whether stakeholders accept equity in place of debt, GM shares are doomed. If stakeholders accept shares, "we would expect the value of existing GM shares to be diluted," he writes. " If an equity exchange is not accepted, GM could file for bankruptcy protection." Levy cut is 12-month target price by $1 to 50 cents, the lowest target price available.
- GM's German-based Opel unit needs some 3.3 billion euros $4.2 billion) to weather the economic crisis, a union official who sits on the company's supervisory board said Friday.
- Saab, the Swedish-based unit of General Motors, filed for protection from its creditors Friday so it can be spun off or sold by its struggling U.S. parent, officials said.