In a bold move, General Motors announced on Wednesday it is not planning on making a $1 billion debt payment due on June 1st. If all goes as planned, GM will reach a debt for equity swap agreement with its lenders by that date, thereby erasing the payment.
GM is currently working on a new viability plan – due on June 1 – which includes a lender debt for equity swap. GM’s new plan reportedly includes a breakeven point of 10 million U.S. sales, which could be enough to entice bondholders to trade in their debts for a stake in the new GM.
However, even if GM doesn’t reach an agreement with its stakeholders, it still doesn’t plan to make the $1 billion payment. If that scenario plays out, GM will file for bankruptcy and settle with lenders in court.
GM CFO Ray Young told The Wall Street Journal that bankruptcy is now “probable†for the U.S.’ largest automaker, but is confident the company will be able to continue on. “They want us to be a viable entity when we emerge,” Young said. “We’re going to get this done.”
