Monday, April 13, 2009

U.S. may have to write off part of General Motors bailout


A top analyst is warning the US may have to write off part of General Motors bailout. Strangely, the bailout loans may make it more likely General Motors will have to file bankruptcy. They have little prospect of ever paying off the kind of debt they now owe the Government, bondholders and the UAW health care/retiree funds. The Obama Administration will need the cover of a bankruptcy to reduce the debt amount owed to the taxpayers. According to Freep.com,

JPMorgan analyst Himanshu Patel said the push for bankruptcy may be driven by growing worry that GM will never stabilize unless the government takes a reduction in its loans to the automaker along with bondholders and the UAW.

“If the government has now truly realized that it will eventually have to ‘restructure’ its own loans to GM (similar to Citi or AIG), a bankruptcy may be much more politically necessary,” Patel said in a research note.

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