* Bondholder rights championed by four lawmakers
* Republicans fear “war on capital” (Adds further comment from letter, background, byline)
By Kevin Drawbaugh
WASHINGTON, May 22 (Reuters) - Four U.S. Republican lawmakers have complained to Treasury Secretary Timothy Geithner that a plan to restructure automaker General Motors Corp (GM.N) subverts the rights of bondholders, according to a letter from the lawmakers obtained by Reuters on Friday
A proposed restructuring favors the claims of the United Auto Workers union “over the rights and claims of the company’s diverse group of bondholders, who collectively hold $7 billion more in General Motors debt than the UAW’s health trust and are equal members of the creditor class,” the lawmakers said.
“Bondholders must have a seat at the table during negotiations in how the company would be restructured,” said the letter to Geithner from Representatives Jeb Hensarling, Eric Cantor, Mike Pence and Pete Sessions.
“We are extremely concerned that in the name of restructuring General Motors, the Presidential Task Force on the Auto Industry ... has begun waging what some believe amounts to a war on capital: contractual rights of investors are being trampled by the government under the rationale of ‘extraordinary circumstances,'” the lawmakers wrote.
GM and the UAW reached a tentative agreement on Thursday to cut hourly labor costs and restructure the funding for $20 billion owed to a union-aligned trust for retiree healthcare.
Analysts have said that now puts the focus on GM bondholders who are being asked to forgive debt in exchange for a 10 percent stake in a reorganized company.
Representatives of the bondholders have rejected that offer as insufficient. The U.S. Treasury would hold a majority stake in a reorganized company under GM’s proposal. The UAW would hold 39 percent and current shareholders would get 1 percent.
Chrysler LLC, GM’s smaller rival, filed for bankruptcy on April 30 after failing to get an agreement from all of its secured creditors on debt restructuring terms. (Reporting by Kevin Drawbaugh; Editing by Kenneth Barry)