Most of the leading banks and lending institutions of US have lent over 28 billion dollars to General Motors which is sinking now. Also GM owes nearly 20 billion to the worker’s union towards a health cover plan.
Few of the lenders have credit default swaps and hence are reluctant to agree for a equity swap for their debt.
And with hardly another five weeks time only available, it is very difficult for all the major lenders to come to a comprehensive swap deal.
Hence GM might go for forced bankruptcy which is the wish of the Treasury. In that scenario, good part of debt will be out of the books and also employee benefits might be cut down drastically. Let us all hope that GM will come out of the current terrible pace quickly and successfully.