UPDATE:Canada Government To Exit GM 8 Yrs From Planned 2010 IPO
June 01 2009 - 3:47PM
Dow Jones News
The Canadian government will fully exit its investment in
General Motors Corp. (GM) eight years after a planned initial
public offering next year, senior government officials said
Monday.
Canada's federal and Ontario provincial governments will provide
the struggling automaker with up to US$9.5 billion and receive an
11.7% equity stake in the company and US$400 million of preferred
shares under its restructuring plan. That package includes a
previously advanced C$500 million.
As reported, GM filed for Chapter 11 bankruptcy protection in
Manhattan earlier in the day. In bankruptcy, it will split into a
"New GM" and an "Old GM," with assets of the former transferred
into an entity owned by the U.S. and Canadian governments, the
United Auto Workers union and the company's unsecured
creditors.
"We have agreed with U.S. Treasury that we must be fully
divested by eight years maximum," a government official said at a
briefing to reporters, speaking on condition of anonymity.
He said the Canadian government will sell a minimum 5% of its
shares each year, at least 30% by the third year and minimum of 65%
by the end of the sixth year.
"The only caveat to that is we won't sell our shares at a time
which is prejudicial to the value of those shares for the
taxpayer," the official said.
He also said General Motors Canada Ltd. won't file for
bankruptcy protection in Canada after reaching key agreements with
a group of U.S. and offshore hedge funds, as well as with
dealers.
The Canadian unit will receive a US$1.3 billion medium term loan
at a minimum interest rate of 7%. Half that money has to be repaid
seven years after the government sells its stake, and the balance
in the eighth year, the official said.
He said GM will use money from the rescue package to, among
other thins, address legacy costs, including those related to
pensions, healthcare benefits and past restructuring. Another
official said GM will use C$4 billion to address pension legacy
costs.
"We think that the restructuring package that we have put
together and the restructuring package in the U.S. will put those
legacy costs to rest and will put the company on a strong financial
footing going forward," the first official said.
He said GM has agreed to C$2.2 billion of capital expenditure in
Canada through 2016, and to spend C$1 billion on research and
development.
-Nirmala Menon, Dow Jones Newswires; 613-237-0668;
nirmala.menon@dowjones.com
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