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CAPITAL RESTRUCTURING
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CONTENTS

1 INTRODUCTION

2 LIST OF COMPANIES

3 GENERAL MOTORS - Overview

4 GM’S CAPITAL RESTRUCTURING

5 CONCLUSION
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CAPITAL RESTRUCTURING
§ Altering the capital structure of a firm; in reaction to the
changed business conditions, or as a means to fund the
firm's growth plans
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§ Restructuring them means reallocating them to improve their

availability (liquidity)


§ The process requires selling assets to buy different ones in

order to improve your capital (monetary) position
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§ It is generally undertaken by companies that are generally

doing poorer than expected
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NEED FOR CAPITAL RESTRUCTURING

§ Necessity for injecting more working capital

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§ When the company is unable to obtain further

credit from suppliers
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§ When the company is unable to utilize its full

production capacity, etc...
 MOTIVES OF CAPITAL LOGO
RESTRUCTURING
1.
2. To enhance liquidity
3. To lower the cost of capital
4. To reduce risk.
5. To avoid loss of Control.
6. To improve Shareholder Value.
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 COMPANIES THAT WENT THROUGH LOGO
CAPITAL RSTRUCTURING
§ United Bank of India
§ Essar steel
§ Zee Telefilms
§ Cholamandalam DBS
§ UCO Bank
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GENERAL MOTORS
 General Motors is a U.S. automaker founded by William C. Durant,
based in Detroit, Michigan, and is the world's second-largest
automaker, as ranked by global unit sales for 2008.


 GM had led in global sales for 77 consecutive years (1931 to 2007),

longer than any other automaker. It manufactures cars and trucks
in 34 countries.


 GM employs 244,500 people around the world, and sold and serviced
vehicles in some 140 countries

 On July 10, 2009, GM reported 88,000 U.S. employees, and announced
plans to reduce its U.S. workforce to 68,000 by the end of 2009
after filing for bankruptcy
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 On July 23, GM announced its new Board of Directors

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7 REASONS FOR FALL OF GM
1 . Not filing for bankruptcy sooner
2 . Driving incentives into the ground
3 . Killing the EV1 electric program
4 . Ignoring Jerry York
5 . Mishandling Fiat
6 . Overreacting to the truck boom
7 . Selling control of GMAC
8.
9.
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 STARTING PHASE OF GM ’ S CAPITAL LOGO
RESTRUCTURING
§ To raise money for reorganization, General Motors divested various
assets including GMAC.


§ In March, 2006, GM announced that it completed the sale of a 78%

interest in its commercial real estate subsidiary, for $1.5 billion in
cash to a private investment group including Kohlberg Kravis
Roberts & Co., and Goldman Sachs Capital Partners.


§ Cerberus Capital Management acquired 51 percent of GMAC from

General Motors in November, 2006 for $7.4 billion
 U . S GOVT .’ S ASSISTANCE IN GM ’ S LOGO
RESTRUCTURING PLAN

§ On December 29, 2008, the U.S. Treasury gave GMAC $5 billion

from its $700 billion Troubled Asset Relief Program
(TARP).


§ In December 2008, the U.S. Treasury invested $5 billion in

GMAC by buying preferred stock which carries a 9 percent
dividend, but had no voting rights.
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§ According to White House Press Release in June,2009 U.S
government will be making a significant additional
investment of about $30 billion in GM
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 AGREEMENTS WITH OUTSIDE LOGO
AGENCIES
§ UAW (United Auto Workers) has reached a new agreement with
GM
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§ New GM will establish a new VEBA, a new independent trust.

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§ VEBA will only have the right to select one independent

director.
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 PRESS RELEASE BY WHITE HOUSE - LOGO
MAY 31 ST 2009
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§ The auto task force (ATF) set up by the U.S President, has
worked with GM on an operational restructuring that is
designed to reduce General Motors break-even point of
about 16 million annual rate of car sales down to 10
million annual car sales environment. 
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§ In the context of the 363 process, a new company, a new GM,

will be formed to purchase the operating assets out of
the old GM that will become part of this new company. 
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 GM ’ s Capital Restructuring LOGO
Initiatives
§ GM launched a bond exchange offer for about $27 billion of
its unsecured public debt. It said 90% of bondholders
will need to agree.


§ GM announced that the bondholders who represent at least 54

% of GM's unsecured bonds, have agreed to tender their
portion of the $27 billion of unsecured debt for a pro
rata share of 10 percent of the equity of new GM for an
additional 58 %.
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§ The governments of Canada & Ontario will lend about $9.5

billion and will receive both debt and preferred stock
and about 12 % of the equity in the new GM, and the right
to pick one of the initial directors.


§ GM offered the U.S. government 50% of its equity in exchange

for canceling half of the $15.4 billion in loans granted
since December.
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 STRENGTHENING GM ’ S BALANCE LOGO
SHEET
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§ Launching a bond exchange offer for approximately $27
billion of its unsecured public debt.


§ Ongoing discussions with the UAW to modify the terms of the

Voluntary Employee Benefit Association (VEBA), and with
the U.S. Treasury regarding possible conversion of its
debt to equity.
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§ Result of at least $44 billion in debt reduction.

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COMPARISON OF OLD & NEW GM
OLD GM NEW GM
12 Number of Brands 6
Buick, Cadillac, Chevrolet, Brands Buick, Cadillac, Chevrolet
Daewoo Daewoo, GMC, Holden
5GMC,
,900 Holden, Hummer, Opel, Dealerships 3,600
Pontiac
Common shareholders, Ownership The U.S. and Canadian
Saab, Saturn, Vauxhall
bondholders , governments,
47
and secured creditors Plants 34
and UAW union
$176 billion Debt $48 billion
91000 US Employees 68500
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AFTER EFFECTS OF RESTRUCTURING
 WON VARIOUS AWARDS

 IMPROVED FUEL EFIICIENCY
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 IMPROVED PRODUCTIVITY
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 REDUCTION IN COSTS
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 REDUCTION IN EXECUTIVE COMPENSTAION
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 CUT IN WORKFORCE
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 EFFECT OF GM BANKRUPTCY ON LOGO
INDIA
§ GM India not affected


§ Substantial opportunities for Indian component

companies shopping for cheap overseas assets
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§ Global sourcing business of Indian auto parts

makers going to take a hit
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Thank You !