Marketplace Scratch Pad

If GM’s "reinvention" doesn’t work…

Scott Jagow Jun 5, 2009

Bankruptcy is really more of a beginning than an ending, since the company gets to start over in a way. But if the new company can’t make a go of it, then there is a definite ending — liquidation. Included in GM’s bankruptcy filing is an analysis of what GM’s ice cube melting would look like.

You can flip through it here if you’d like. But Dealbook highlights the main points:

In a fire sale, the largest United States automaker would likely yield less than $10 billion in net proceeds.

The costs of liquidating would be huge, according to the analysis — between $2 billion and $2.7 billion, the document says. Taking that into account, the amount left for creditors would be between $6.5 billion and $9.7 billion…

And what would G.M.’s creditors get?

Bank lenders owed $5.4 billion would recover between 26.3 and 77.1 cents on the dollar. The United States Treasury, on the hook for $20.5 billion, fares even worse under this scenario, getting just 12.7 cents to 23.7 cents on the dollar for its claims. Unsecured creditors would get nothing.

I think that paragraph speaks for itself.

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