Bankruptcy or Bust

February 9, 2009

an_american_revolution_bannerAlmost on cue, with an end-March restructuring plan deadline looming, reports of General Motors’ impending demise are bubbling up from the slush of a winter’s economic meltdown. The Wall Street Journal reports GM is looking to take back big chunks of bankrupt parts supplier Delphi, which it spun off a decade ago. The move would make GM bigger just when it is busy right-sizing. Is it taking aim at gaining that exalted Too Big To Fail status that has saved so many banks?

Meanwhile, Bloomberg has an analytical piece suggesting the U.S. government will insist on bankruptcy at GM and Chrysler, engineered to put taxpayer money above other claims. Whatever the case, it is clear the fate of the automakers is again the subject of much debate in the Oval Office. Turnaround plans from GM and privately held Chrysler are expected before the end of the month, and the White House says no decisions are expected before then.

The Obama administration confirmed our reporting that it had hired two law firms to assist Treasury Department officials on auto restructuring matters, lending some credibility to the bankruptcy argument. Lawyers tend to hover and hop around with vulture-like efficiency when talk of bankruptcy funding gathers momentum.

GM and Chrysler have until March 31 to demonstrate to the government that they can be commercially viable. Both told policymakers in December that they faced possible near-term collapse without aid. While the White House talks with lawyers, there is still no sign of a much-talked-about car “czar” to provide a little incentive for revolution.

Deals of the Day:

* Australasian brewer Lion Nathan said it had abandoned its around A$7.3 billion bid for soft drinks maker Coca-Cola Amatil after talks between major shareholders in the two companies broke down.

* Britain’s BG Group offered A$796 million ($538 million) for Australia’s Pure Energy, trumping Arrow Energy, but analysts were unsure whether a bid battle loomed in the chase for assets in Australia’s coal seam gas sector.

* Satellite mogul Charles Ergen made an unsolicited offer late last year to take control of Sirius XM Radio, and was rebuffed, the Wall Street Journal said, citing people familiar with the situation.

* British non-life insurer Chaucer said it has received “a number of approaches” that may lead to an offer for the company, in response to speculation in the media.

* India’s UTI Asset Management is close to selling a 26 percent stake for $175-$200 million to one of at least four investors and private equity firms, valuing the firm at 7-8 percent of assets, banking sources said.

* India’s No. 3 software services exporter, Wipro, which has a cash chest of $500 million, is looking for acquisition opportunities, notably in Europe, its chairman and founder told French daily Les Echos.

* UniCredit investors will take up a 500 million euro shortfall left when its biggest shareholder pulled out of plans to raise 3 billion euros ($3.84 billion), the Italian bank and its adviser Mediobanca said.

* French oil group Total , which is seeking a double-digit percentage stake in France’s second EPR nuclear plant, also wants to play an active role in its construction.

* Sweden’s debt office has found a buyer for the investment banking arm of Carnegie which was taken over by the state late last year.

* Global mobile phone companies Vodafone and Hutchison Whampoa will merge their Australian businesses to create a company able to take on the dominant operators, the two firms said.

* Egypt’s state-controlled Housing and Development Banksaid it was considering buying a stake in UAE real estate developer Damac.


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