GM in "intense" preparations for bankruptcy: source

NEW YORK/DETROIT (Reuters) – General Motors Corp is in “intense” and “earnest” preparations for a possible bankruptcy filing, a source familiar with the company’s plans told Reuters on Tuesday.

A plan to split the corporation into a “new” company made up of the most successful units, and an “old” one of its less-profitable units, is gaining momentum and is seen as the most sensible configuration, said another source familiar with the talks.

The sources requested anonymity because they were not authorized to speak on the record.

Shares of GM fell almost 14 percent on the New York Stock Exchange and its bond prices declined.

If the plan goes through, the new GM would be expected to assume some previous creditor debt from bankruptcy proceedings, such as secured debt, said the second source, adding that GM bondholders were likely to lose substantial value in bankruptcy.

Reuters