(snip)"General Motors is on the Brink of Default and Bankruptcy
Right at the close of trading Fitch and the other rating agencies cut General Motors debt ratings. In particular Fitch was quite specific that GM will either be bailed out or will be forced to default and restructure.
"Given the current liquidity level of $16.2 billion and the pace of negative cash flows, Fitch expects that GM will require direct federal assistance over the next quarter and the forbearance of trade creditors in order to avoid default."
In addition, and perhaps unrelated, AIG has moved its 3Q 08 financial results from after the close of trading on Monday to 6 AM, before the Bell.
Another late Sunday night before the start of Asia trading?
Fitch Places GM's 'CCC' IDR on Rating Watch Negative
07 Nov 2008 3:57 PM (EST)
Fitch Ratings-New York- Fitch Ratings has placed the Issuer Default Rating (IDR) of General Motors (GM) on Rating Watch Negative as a result of the company's rapidly diminishing liquidity position.
Given the current liquidity level of $16.2 billion and the pace of negative cash flows, Fitch expects that GM will require direct federal assistance over the next quarter and the forbearance of trade creditors in order to avoid default.
With virtually no further access to external capital and little potential for material asset sales, cash holdings are expected to shortly reach minimum required operating levels.
GM remains dependent on the capacity and willingness of its suppliers to continue extending trade credit, as the company does not have sufficient resources to finance ongoing operations in the event that trade credit is curtailed.
Over the intermediate term, GM's expanded debt load and debt service costs, when combined with significantly reduced earnings capacity, indicate that material improvement in the balance sheet is unlikely absent a restructuring of the balance sheet. This could eventually take place through a distressed debt exchange.
Fitch believes that direct federal aid is highly likely to be forthcoming, although the amount, timing, structure and term remain uncertain. Without material federal assistance in the short term, Fitch would review the rating for a potential downgrade to 'CC', which indicates that default is probable. "(snip)
Also, from Obama's press conference, it would appear that Fitch's assessment of a 50 billion dollar US taxpayer bailout of GM being on the horizon is correct. This 50 billion would be on top of the 20 billion FED loan that the gov't has already approved !!!
The author's reference to AIG delaying their financial report until monday morning is undoubtedly based on speculation that, despite the 85 billion that US taxpayers have already spent to bail out AIG, that their losses may in fact be so great that the 85 billion was insufficient to prevent default ... at which point US taxpayers face a choice of 'losing' their 85 billion or throwing additional tens of billions of dollars in AIG's direction in an attempt to keep them solvent for another month or two.
The tongue in cheek commentary of course is that the US taxpayer has been used as a 'patsy' vis a vis the AIG bailout, and that an impending bailout of GM will open exactly the same sort of Pandora's box in terms of potential never-ending bailouts versus taking a major loss on the initial bailout attempt.



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