GM next on bankruptcy road?

SOUTHFIELD/MICHIGAN: General Motors Corp may be more likely to end up in bankruptcy based on the Obama administration���s willingness to place Chrysler LLC into court protection to safeguard union health-care benefits.

With GM and its biggest bondholders at odds over resolving $27 billion in unsecured claims by a June 1 deadline, the Chrysler model indicates that President Barack Obama may resort to bankruptcy to end any impasse over that debt, said Martin Fridson, chief executive officer of New York-based credit investment firm Fridson Investment Advisors.

���This confirms the fear, which right along has been that the Obama administration is more sensitive or beholden to the unions than the bondholders,��� Fridson said. ���It makes it clear that GM bondholders aren���t likely to be able to work out anything outside of bankruptcy.���

GM bondholders proposed April 30 they get a 58% ownership stake in the Detroit-based automaker in exchange for their $27 billion in unsecured claims. Bondholders are objecting to GM���s proposal they get a 10% share of GM equity while a union health fund would get $10 billion in cash and as much as a 39% stake for $20 billion in unsecured claims.



���There���s no question Chrysler��� acts as a dry run for GM, said Sean Egan, president of Egan-Jones Ratings Co in Haverford, Pennsylvania. ���It was designed that way because Chrysler is a much more manageable entity. The impact on the economy, on employment, is a microcosm of what is likely to happen with GM.���

Even if there is appetite for an agreement, it���s unlikely the thousands of GM bondholders can be pulled together in time, said John Casesa, managing partner at New York-based consulting firm Casesa Shapiro Group.