GM may not meet loan conditions

GM may not be able to meet a key condition of its government loan.

As part of a deal for a government bailout, GM is required to reduce its unsecured debt by two-thirds. That is, debt held by private bondholders. It was supposed to convince bondholders to swap debt for equity in GM but bondholders seem weary of doing so.

GM's Chief Financial Officer Ray Young now says that GM may not be able to meet that condition.

GM was the recipient of a massive bailout in which the automaker received 13.4 billion US dollars in emergency, low-cost loans from the US Treasury. That only adds to the automaker's immense debt burden. GM has about 60 billion dollars in debt on its books which includes 27.5 billion in bondholder debt but not the approximately 22 billion in debt from government bailouts in the US and Canada for GM and GMAC, its financial arm.

One of the conditions of the loan was for GM to reduce that 27.5 billion in bondholder debt to 9.2 billion. But Young sees that condition as more of a guideline. He said that "the ultimate test is financial viability of our enterprise".