According to a Bloomberg story this morning, General Motors
(GM) mya not actually have many options when it comes to potential bankruptcy.
The company may be forced into bankruptcy by the U.S. government
to assure repayment of $17.4 billion in federal bailout loans. The U.S. government
and taxpayers are situated behind other creditors which include Citigroup Inc.,
JPMorgan Chase & Co. and Goldman Sachs Group Inc., according to loan
agreements posted on the U.S. Treasury’s Web site.
Government officials may force the companies into
bankruptcy as a condition of more bailout aid, if there is not consensual
agreement to change their position regarding repayment. The automakers have
been adamant about reorganizing under bankruptcy protection, saying a Chapter
11 restructuring would scare away buyers and lead to liquidation.
General Motors and Chrysler LLC. are both approaching a
Feb. 17 deadline to show progress on a plan put in place as part of the U.S. loans
received in December from the Troubled Asset Relief Program.
The Bottom Line
We are still avoiding the speculative shares of GM at this point. We are not
sure a pre-packaged bankruptcy is out of the question, which makes buying
shares very risky. The government would not be hiring a law firm and waste more
taxpayer dollars if they didn't think bankruptcy was a viable alternative.
General Motors (GM) does not pay a dividend at this current
Be sure to visit our complete recommended list of the Best Dividend Stocks, as well
as a detailed explanation of our ratings