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BAILOUT: Treasury, UAW health care trust will sell 50 million shares of GM stock at a $10 BILLION loss

By Catholic Online (NEWS CONSORTIUM)
June 5th, 2013
Catholic Online (www.catholic.org)

The Treasury sold nearly 20 percent of its remaining shares in General Motors in the first three months of the year, the Detroit automaker disclosed.

LOS ANGELES, CA (Catholic Online) - The U.S. Treasury says that it plans to sell 30 million additional shares of General Motors stock in a new public offering in conjunction with GM's return to the S&P 500 index.

Holding about 14 percent of GM, the United Auto Workers Retiree Medical Benefits Trust plans to participate by selling 20 million shares. This will make the total offering size 50 million shares, representing about 12 percent of Treasury's outstanding GM stock.

This may mean that Treasury completely exits in 2013, rather than by the end of March 2014. The return to the S&P will prompt significant demand for GM shares. Stocks have recently traded near its highest level since February of 2011. GM is filing a new prospectus ahead of the sale.

The Treasury sold nearly 20 percent of its remaining shares in General Motors Co. in the first three months of the year.

The Treasury, which initially held 60.8 percent of GM as part of the U.S. $49.5 billion bailout, now owns just 16.4 percent, or 241.7 million shares. The Treasury sold GM 200 million shares of its stake for $5.5 billion last December to reduce its stake to 300 million shares.

The Treasury has recouped $30.6 billion in total. At current trading prices, Treasury would lose around $10 billion on its GM bailout.

GM's return will mark the purchase of GM shares by many stock index funds. GM said it was happy to assist.

"We appreciate the opportunity to assist in this offering made possible by our rejoining the S&P 500," Dan Ammann, GM senior vice president and chief financial officer says. "Our focus remains on continuing the progress we are making in the marketplace with world-class cars, trucks and crossovers."

The move means that the UAW trust will hold about 140 million shares after the sale, or a nine percent stake, about the same size as the Canadian government's 140 million shares it still holds as part the Ontario and Canadian federal government's $10 billion GM bailout in 2008 and 2009.

"The sale is opportunistic given the recent S&P500 inclusion announcement, which we estimate requires an 85.4mm share buy. The accelerated sell-down by the government should be viewed positively," Capital analyst Joseph Spak says. "We believe (the Treasury exit) could be quicker - perhaps by the end of the year. This could open the door for additional capital actions including a potential dividend."

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