GM Admits Defeat from Lenders

General Motors has officially confirmed that it did not manage to swap the $27 billion debt for shares in the new company. The confirmation came as a result of the expiration of the exchange offer, which debuted on April 27. The already submitted exchange offers will not be honored. Below you have an excerpt from the official GM document.

"The exchange offers expired at 11:59 p.m. EDT on May 26, 2009, at which time the principal amount of notes tendered was substantially less than the amount required by GM to satisfy the debt reduction requirement under its loan agreements with the U.S. Department of the Treasury, to meet the debt reduction objectives under its viability plan, or to meet the minimum tender condition of the exchange offers as required by the U.S. Treasury. Since these conditions, as well as certain other conditions, have not been satisfied, the exchange offers will not be consummated."

The rejection of the offer by the bondholders has steered, probably decisively, the American manufacturer into bankruptcy. The prospect of the largest bankruptcy of an industrial company in the US will be discussed, as was to be expected, by GM's board of directors.

Analysts agree with the rejection of the exchange offer. According to Pete Hastings, a credit analyst at Morgan Keegan, the rejection is sound, due to the fact that the offer itself is unsuitable.

"I would say this is a sound rejection of an unsuitable offer. I have been saying for some time that this thing was dead on arrival and we were just waiting for the doctor to pronounce it dead. Now that's happened," said the analyst.