The full affidavit can be found here.
Some juicy sections:
16. Prior to the Commencement Date, GM paid Evercore total fees of $24.1 million and reimbursed expenses in the amount of $397,035 for all services rendered. Pursuant to the Engagement Letter, Evercore will receive a fee of $2.5 million for assisting GM in the structuring and implementation of the debtor in possession financing and a net fee of $13.0 million if the transaction which is the subject of the 363 Motion is consummated. There is no allocable share of the foregoing fees that will be paid directly to me. Of course, the allowance of the foregoing fees is subject to bankruptcy court approval.
23. Evercore began working with GM in June of 2008 to advise GM on capital-raising options and other strategic alternatives as GM prepared to make a public announcement of its liquidity preservation plan in conjunction with its 2Q2008 earnings release in July.
24. In early July 2008, the equity and debt markets continued to show a lack of investor confidence, which significantly hampered GM’s ability to meaningfully enhance its liquidity through either a public equity offering or an unsecured debt financing. As the chart in attached Exhibit C illustrates, the price of GM’s common stock had declined by 49% to $11.75 from May 1st, 2008 to July 1st 2008, the price of GM’s long-term unsecured bonds had reportedly traded down from the mid-70s in early May to the mid-50s by early July and its credit default swaps (insurance-like contracts that promise to cover losses on certain securities in the event of a default) had widened to 1,832 bps by July 1st, 2008, further widening to 9,097 by year end.
25. At this point, the only capital-raising alternative available to GM appeared to be a potential issuance of secured debt financing using all of GM’s unpledged and available collateral, including the stock of certain of its foreign subsidiaries, certain intangible assets, including its brands, and intellectual property. In July, GM began discussions with several potential underwriters regarding such a transaction.
26. Significant effort was expended by GM, its team of financial and legal advisors and its potential underwriters to develop a secured financing offering. However, during the second half of 2008 the financial markets continued to deteriorate to an unprecedented state of distress. Neither the leveraged-loan market nor the market for secured high yield bonds had sufficient liquidity, and sellers of leveraged loans and bonds vastly outweighed buyers, putting severe pressure on market trading levels. Consequently, GM and its advisors concluded that, not only would the proceeds that could be raised by the offering be insufficient to provide GM with sufficient liquidity, but also that the financing would be prohibitively costly and would impair GM’s future capital-raising alternatives when considering, among other factors, the pricing that buyers would have demanded, the collateral that would have to have been pledged, and the
covenants with which GM would have had to comply.
29. Consequently, in early November 2008, GM was compelled toredirect its capital-raising focus to the “last resort” source of funds: the U.S. Government.
34. None of the financial institutions that Evercore and I contacted expressed any interest in providing a debtor in possession financing facility for the Debtors. In fact, the institutions specifically communicated that they were not willing to consider such a financing. Indeed, based on my experience, the amounts in question exceed the legal lending limits of any financial institution I am aware of. Thus, DIP Financing of the magnitude contemplated in the DIP Motion would require an extraordinary degree of cooperation to arrange and syndicate among a large number of financial institutions. This, given current market conditions, is not achievable.
Also, below is the asset sale fee schedule for Evercore depending on what "price" it spins off Vehicle Acquisition Holdings LLC (aka Good GM).
Sphere: Related Content
Bookmark this post with:
