Reuters / Greenlight Capital escalated its battle against General Motors Co. ( GM.N ) on Thursday, posting credit ratings documents related to the hedge fund’s dual-share plan that it said were inappropriately changed by GM to undermine its proposal.
Greenlight, which owns 3.6 percent of GM shares, has proposed two classes of stock to boost the automaker’s value – a dividend class and a regular stock class known as capital appreciation shares.
In its proxy statement last month, Greenlight said GM substantially altered the plan’s term sheet before it was presented to credit rating agencies, a move the hedge fund said was meant to turn the agencies against the structure.
On Thursday, Greenlight posted (www.unlockgmvalue.com) its original term sheet, the term sheet it said was given to the agencies, and an annotated document highlighting the changes.
“Our plan does not have cumulative dividends,” Greenlight said in one of the annotations – pointing out a key sticking point in the debate over the plan. In another annotation, Greenlight highlighted a change from the original and said GM invented a term to misrepresent its plan.
Greenlight, run by David Einhorn, argued that the dividend shares function as common equity and should not be treated as debt.
GM says that because Greenlight’s plan calls for the dividends on the dividend shares to be received ahead of capital appreciation share distributions, the structure is cumulative by definition. According to GM’s interpretation, that means any dividends that accumulate in periods where there is no payout must be paid ahead of any distributions, including share repurchases.
The ratings agencies have sided with the company in ruling that the dividend class is cumulative in nature and therefore functions like a debt security, which could impact GM’s credit rating.
Greenlight in its annotated letter pointed out more than 13 changes made to the original term sheet.
GM said on Thursday that it presented information accurately and responsibly to the ratings agencies.
“Greenlight’s claims regarding GM’s engagement with the rating agencies relative to Greenlight’s Dividend Shares proposal are baseless…” the company said, calling the plan “financial engineering.” The company’s own annotated version is available at www.gmproxy.com
Earlier on Thursday, Greenlight urged GM shareholders to vote for its plan and its three director nominees to GM’s board at the company’s shareholder meeting next month.
Greenlight said GM had lagged peers and generated only a 15 percent total return for shareholders since its initial public offering in late 2010.
(Reporting by Ankit Ajmera in Bengaluru; Editing by Sai Sachin Ravikumar and Supriya Kurane)
GLOBALES: Greenlight says documents show GM tried to undermine dual-share plan
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