While specifics of General Motors planned IPO have yet to be released, it appears the company’s retirees will wind up owning an even bigger chunk than before.
The U.S. Labor Department has given the go-ahead for GM to fund the United Auto Workers Union’s retiree health care trust fund, a so-called VEBA, with a mix of warrants, debt, and both common and preferred stock.
The decision could wind up making the UAW the largest shareholder in GM once the government eventually sells off its more than 60% stake in the automaker.
The move also helps avoid a situation in which the health car trust, known formally as a Voluntary Employee Beneficiary Association, might go bust and need a federal bailout. The GM VEBA was established two years before the maker’s 2009 bankruptcy as part of an effort to shift health care costs off company books. But GM’s Chapter 11 filing raised serious concerns about its viability.
Without the Labor Dept. waiver, the UAW fund would not have been allowed to hold more than 10% of the “new” GM’s stock. It will now be permitted to go up to 18% in common shares, while also holding up to 2.5% in GM warrants.
The VEBA will also hold $6.5 billion in preferred stock, along with a $2.5 billion note.
GM is expected to announce the timing of its initial offering sometime in the next few weeks. The maker appears to be waiting for word on its third-quarter earnings; a strong performance will be critical in selling shares in the post-bankrupt automaker.
Meanwhile, current employees, retirees and dealers will be offered the unusual opportunities to play alongside the big banks and investment firms by buying shares of the company at the same initial offering price during the IPO.
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