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GM bondholders accept deal
The agreement could help the automaker avoid bankruptcy. Reports on durable goods and jobless claims are better than expected, but a report on new-home sales disappoints. Time Warner will spin off AOL. Yahoo's CEO says she'd sell to Microsoft for 'boatloads' of cash.
By Charley Blaine and Elizabeth Strott
General Motors (GM, news, msgs) this morning put the brakes on its cruise toward bankruptcy.
The automaker said its major bondholders have accepted a revised deal to exchange their debt for equity in a new company.
The bondholders will get 10% equity and then the option to buy another 15% of the company when the company hits certain market capitalization levels. The bondholders have to accept it pursuant to section 363(b) of the U.S. Bankruptcy Code.
The deal still needs acceptance from all of GM's bondholders.
"Implementation of this proposal would result in a New GM with a healthy balance sheet, putting the new company on a clear path toward long-term viability and success," GM said in a statement.
Shares of GM, which had been halted in early trading, were up 14 cents, or 12.2%, to $1.29 this morning.
Stocks turned lower after a disappointing report on new-home sales was released. At 10:15 a.m. ET, the Dow Jones Industrial Average ($INDU) was down 42 points to 8,258. The Nasdaq Composite Index ($COMPX)had lost 12 points to 1,719, and the Standard & Poor's 500 Index ($INX) was down 4 points at 889.
The yield on the 10-year Treasury note jumped Wednesday afternoon to nearly 3.7% from 3.5% Tuesday and 2.24% on Dec. 31. The spread between two-year notes and Treasury notes hit 2.75 percentage points, the biggest gap since August 2003. The higher yield threatened to push up interest rates in key areas like mortgages and consumer loans. The Obama administration needs low interest rates to help the housing market and the broader economy to recover from the steepest recession since World War II.
"The equity market and Treasury market are reflecting the current concerns about increased Treasury issuance," Craig Peckham of Jefferies told The Wall Street Journal. "It's just more and more supply, and we're really concerned about pressure on the dollar from Treasury issuance and the Fed's balance sheet."
This morning, the yield on the 10-year Treasury moved down slightly to 3.68%.
More on GM's Hail Mary deal
Bankruptcy is still likely for GM, bu the deal with bondholders would make it a smoother process.
On Wednesday, bondholders rejected the offer to exchange $27 billion in debt for stock in a new company.
GM has until Monday to present the federal government with a restructuring plan, and it needed deals with its bondholders and with the United Auto Workers union. The UAW announced
In related news, negotiations on the future of General Motors' (GM, news, msgs) European operations broke down overnight after the U.S. carmaker reportedly demanded an additional $415 million in cash.
Meanwhile, New York bankruptcy court judge Arthur Gonzalez is set to rule today on whether Chrysler can emerge from bankruptcy.
He is expected to rule that the sale of the company's most viable assets to a group of investors led by Italy's Fiat (FIATY, news, msgs) can go through. If that's the case, Chrysler will have spent just 30 days in Chapter 11.
MSNBC
The agreement could help the automaker avoid bankruptcy. Reports on durable goods and jobless claims are better than expected, but a report on new-home sales disappoints. Time Warner will spin off AOL. Yahoo's CEO says she'd sell to Microsoft for 'boatloads' of cash.
By Charley Blaine and Elizabeth Strott
General Motors (GM, news, msgs) this morning put the brakes on its cruise toward bankruptcy.
The automaker said its major bondholders have accepted a revised deal to exchange their debt for equity in a new company.
The bondholders will get 10% equity and then the option to buy another 15% of the company when the company hits certain market capitalization levels. The bondholders have to accept it pursuant to section 363(b) of the U.S. Bankruptcy Code.
The deal still needs acceptance from all of GM's bondholders.
"Implementation of this proposal would result in a New GM with a healthy balance sheet, putting the new company on a clear path toward long-term viability and success," GM said in a statement.
Shares of GM, which had been halted in early trading, were up 14 cents, or 12.2%, to $1.29 this morning.
Stocks turned lower after a disappointing report on new-home sales was released. At 10:15 a.m. ET, the Dow Jones Industrial Average ($INDU) was down 42 points to 8,258. The Nasdaq Composite Index ($COMPX)had lost 12 points to 1,719, and the Standard & Poor's 500 Index ($INX) was down 4 points at 889.
The yield on the 10-year Treasury note jumped Wednesday afternoon to nearly 3.7% from 3.5% Tuesday and 2.24% on Dec. 31. The spread between two-year notes and Treasury notes hit 2.75 percentage points, the biggest gap since August 2003. The higher yield threatened to push up interest rates in key areas like mortgages and consumer loans. The Obama administration needs low interest rates to help the housing market and the broader economy to recover from the steepest recession since World War II.
"The equity market and Treasury market are reflecting the current concerns about increased Treasury issuance," Craig Peckham of Jefferies told The Wall Street Journal. "It's just more and more supply, and we're really concerned about pressure on the dollar from Treasury issuance and the Fed's balance sheet."
This morning, the yield on the 10-year Treasury moved down slightly to 3.68%.
More on GM's Hail Mary deal
Bankruptcy is still likely for GM, bu the deal with bondholders would make it a smoother process.
On Wednesday, bondholders rejected the offer to exchange $27 billion in debt for stock in a new company.
GM has until Monday to present the federal government with a restructuring plan, and it needed deals with its bondholders and with the United Auto Workers union. The UAW announced
In related news, negotiations on the future of General Motors' (GM, news, msgs) European operations broke down overnight after the U.S. carmaker reportedly demanded an additional $415 million in cash.
Meanwhile, New York bankruptcy court judge Arthur Gonzalez is set to rule today on whether Chrysler can emerge from bankruptcy.
He is expected to rule that the sale of the company's most viable assets to a group of investors led by Italy's Fiat (FIATY, news, msgs) can go through. If that's the case, Chrysler will have spent just 30 days in Chapter 11.
MSNBC
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