Tom Reese/Paul Rubillo, Dividend.com
According to a Bloomberg story this morning, General Motors (GM) mya not actually have many options when it comes to potential bankruptcy.
The company may be forced into bankruptcy by the U.S. government to assure repayment of $17.4 billion in federal bailout loans. The U.S. government and taxpayers are situated behind other creditors which include Citigroup Inc., JPMorgan Chase & Co. and Goldman Sachs Group Inc., according to loan agreements posted on the U.S. Treasury’s Web site.
Government officials may force the companies into bankruptcy as a condition of more bailout aid, if there is not consensual agreement to change their position regarding repayment. The automakers have been adamant about reorganizing under bankruptcy protection, saying a Chapter 11 restructuring would scare away buyers and lead to liquidation.
General Motors and Chrysler LLC. are both approaching a Feb. 17 deadline to show progress on a plan put in place as part of the U.S. loans received in December from the Troubled Asset Relief Program.
The Bottom Line
We are still avoiding the speculative shares of GM at this point. We are not sure a pre-packaged bankruptcy is out of the question, which makes buying shares very risky. The government would not be hiring a law firm and waste more taxpayer dollars if they didn't think bankruptcy was a viable alternative.
General Motors (GM) does not pay a dividend at this current time.
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