GM creditors face another haircut

(breakingviews.com) -- General Motors' creditors aren't out of the woods yet.

The ailing carmaker's most recent restructuring plan may well look draconian already, aiming to exchange up to $48 billion of union, bondholder and U.S. government liabilities for stock. But even if the plan goes through, GM (GM, Fortune 500) will still be left with as much as $50 billion in debt.

How? Well, it still has $6 billion of secured debt, will still owe $10 billion to both the government and the United Auto Workers' independent healthcare trust and executives reckon they'll need another $9 billion from the U.S. to cover more losses.

Add to that $11 billion of expected loans from the Department of Energy and foreign governments and $3 billion of unsecured debt, assuming 90% of bondholders accept the equity swap.

To have an enterprise value that supports such a hefty debt load and leave something for shareholders, GM would have to generate some $13 billion in cashflow a year. Put on a similar multiple to peers of four times EBITDA, that would imply an enterprise value of $52 billion.

That would value the stock at just $2 billion, which would be fine if that were achievable in short order. But GM won't hit that until 2013, according to Barclays Capital. And that's assuming GM's cash burn estimates are accurate.

What's more, finance chief Ray Young says he'd like GM's debt burden to be no more than two times EBITDA. That means GM would have to cut its new debt load in half based on 2013 numbers.

Detroit's number one carmaker won't be able to do that by selling cars. That leaves executives with little option but to inflict more pain on its workers and lenders - including taxpayers.