General Motor’s Chairman, Board member, and now CEO, Ed Whitacre told everyone that they would be paying back the U.S. and Canadian government by June, 2010. GM announced  it’s plan to repay it’s TARP investment to the U.S. Government., but what does the loan restructuring repayment look like?

To understand what they are paying back we need to look at what they owe and who they owe it you. Tom Wilkinson, spokesperson for General Motors, helped me figure it all out.

Who owns General Motors, and by how much?

60% is owned by the Government

17.5% is owned by voluntary employees’ beneficiary association (VEBA), which is supervised by an independent board

11.7% is owned by the Canadian/Ontario governments

10% is owned by the Motor Liquidations Company (MLC) , or commonly known as, the old GM

There are  three different piles of money General Motors owes the U.S. treasury:

1. $6.7 billion pure loan. That first payment was made in late December or mid-December of about $1 billion.  There is $5.7 billion of that debt remaining outstanding.

2. preferred shares – $2.1 billion worth of preferred shares that pay dividends and can be sold anytime.  This is  owned by governments and the UAW VEBA.

3. 60.8% of common stock

Whitacre said that GM was also going to pay back the $1.2 billion they owned the Canadian/Ontario government.

So, where will they get the money?

General Motors currently has $13.4 billion dollars in a restricted cash account, known as a Debtor-in-possession (DIP), which means that the company has to get approval from the UST for utilizing that money.  GM has paid down some debt, including repayment of $4 billion to pay the German government and for their first debt repayment. Once the $5.7 billion to the United States and $1.2 billion debt to Canada/Ontario is paid off the rest of that cash becomes unrestricted.

Are they paying interest on the loan?

Mr. Bloom: As far as the interest, I know the rate is seven percent on the loan.  I think so far if you include both the interest and the dividends on the preferred, so far, they’ve paid $470 million to us. So there will obviously be an additional number that will come between here and June, which I don’t have off the top of my head, but to date, it’s $470 million.

Mr. Bloom was asked if the task force asked GM to pay the money back, or did GM volunteer?  This was his response:

MR. BLOOM: We have regular dialogue with General Motors regarding issues facing the company.  We keep very close tabs on their financial performance.  I think both of us thought this was a good idea.  I can’t actually tell you who the initiator was.  Mr. Whitaker has publicly said he wants to pay the government back, the debt money that is owed and we certainly didn’t discourage him from that. So I would say it was a mutual thing.

And why did you think it was a good idea?

MR. BLOOM:  I think it’s a good idea because, number one, the faster the taxpayers can’t get their debt securities repaid and the faster that money flows back to the Treasury of the United States, the better for the Treasury and for the taxpayers, number one.  Number two, we do not feel that this in any way endangers GM.  They’re doing well.  They’re doing a little bit better actually than the plan we had originally looked at when we put the financing together.  And so on the one side, it’s good for the taxpayers to get their money back, and on the other side, we do not feel that this puts GM in any way, shape or form in harm’s way. So when you have a positive and no negative, you go forward with it.

Before bankruptcy the old GM had $94.7 billion in debt. At the end of the third quarter of 2009 GM had $17.2 billion in government and non-government debt.

General Motors has a revenue stream of $110-$120 billion yearly on a worldwide basis.

Wilkinson says that they would still like to try for an IPO in the 2nd half of 2010, but timing depends on market conditions and auto industry and General Motors performance.

What would Mr. Bloom have to say about an IPO?:

MR. BLOOM:  Well, we’ve said before and I don’t think I have anything particularly new on that topic.  We are hopeful that sometime in the back half of 2010, the company is able to execute an initial public offering.  That will obviously remain dependent on how markets are and whether the company continues to make progress on their restructuring, but it is our hope that that could occur.  At that stage, we would expect to sell some of our ownership.  We do not think it is practical to sell all 60.8 percent in one fell swoop.  And so there will be a staged exit beginning with the IPO and moving out after that. We have stated as a principle, the president has approved a principle that says we should exit this investment as soon as is practicable, but exactly how long it takes is going to depend on market factors and other things which we’re not in a position to predict at this point.

The precise determination of the period under which Mr. Feinberg will be supervising GM, while the government is still in possession of stock, is something that’s still being worked out.

How much money was given to General Motors?

In a press conference today Ron Bloom, auto task force leader said that the total amount the Government paid General Motors was $49.5 billion. On December 31, 2008, Treasury agreed to make loan $13.4 billion to General Motors Corporation to fund working capital. Under the loan agreement, GM was also required

to implement a viable restructuring plan. The first plan GM submitted failed to establish a credible path to viability, and the deadline was extended to June 1. Treasury loaned an additional $6 billion to fund GM during this period. To achieve an orderly restructuring, GM filed for bankruptcy on June 1, 2009. Treasury provided $30.1 billion under a debtor-in-possession financing agreement to assist GM during the bankruptcy. The new entity, General Motors Company (New GM), began operating on July 10, 2009, following it’s  purchase of most of the assets of the Old GM.

Was part of that loan written off in the bankruptcy?

Mr. Bloom: The Bush administration did loan General Motors $13.4 (billion), there were some additional investments made and then the DIP loan. Essentially, the entire investment that the Treasury made was converted into the three instruments I described, which is to say the $6.7 (billion) in debt, the $2.1 (billion) of preferred, those two obviously equal $8.8 (billion) of fixed obligations and the 60.8 percent ownership of the common stock. So that’s what the government has and the return on that total investment will be, you know, $8.8 (billion), which we’ll get back in the preferred and the debt plus the interest and dividends, which I spoke about, and obviously, whatever we’re able to realize on the common stock.

Q     Okay.  So that $13.4 (billion) is part of that larger breakdown that you get, it’s not a separate — it’s not looked at or held separately in any way?

MR. BLOOM:  No.  No, it’s not.  What we have in totality and we said this at the time of the restructuring that we thought it would be challenging for the value of the stock to go high enough that the entirety of the investment including the $13.4 (billion) would be repaid and that’s been talked about by the various oversight bodies. On the other hand, the future value of the common stock is unknowable and over time it will be what it will be.

Q:  So the total amount is the $30.1 (billion) in DIP financing plus the $13.4 (billion) plus a couple of other

MR. BLOOM:  The total, total, total if you include all of the monies is $49.5 billion.