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Old 04-27-2009, 01:13 PM   #1
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Default GM launches last ditch bond exchange offer

NEW YORK (Reuters) -- General Motors launched a last ditch effort to reduce its debt, offering to exchange about $27 billion of its notes for common stock to cut costs.

In a filing to the Securities and Exchange Commission, the company said today it is offering to issue 225 shares of its common stock for each $1,000 principal of notes and to pay cash for accrued interest. GM said bondholders would hold about 10 percent of the company after a successful exchange offer.

The rest of the company would be owned by a combination of the U.S. Treasury and the UAW's retiree health care trust fund, CEO Fritz Henderson said today.

GM is facing a June 1 deadline to come up with a plan to make deep reductions in debt, labor costs, dealership network and brands to return to profitability.

"In the event that GM does not receive prior to June 1, 2009, enough tenders of notes to consummate the exchange offers, GM currently expects to seek relief under the U.S. Bankruptcy Code," the company said.

Analysts said the offer might represent the last best hope for the company's bondholders.

"I think that if I was a bondholder I would probably accept this because at least you have some ability to get some cash on the accrued interest side and get some shares that you can sell," said William Larkin, portfolio manager with Cabot Money Management in Boston.
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