* Greenlight: GM misled ratings agencies on two-class share
* GM says any such claim "baseless and irresponsible"
* S&P Global Ratings sticks to original assessment of
* No other GM investors have yet backed Greenlight proposal
* Greenlight slate of GM board nominees includes Leo Hindery
(Adds BREAKINGVIEWS item to Related Content)
By Nick Carey and Svea Herbst-Bayliss
DETROIT/BOSTON, April 12 Greenlight Capital
nominated three directors to General Motors Co's board on
Wednesday and accused the company of misrepresenting to ratings
agencies the prominent hedge fund's proposal to split the
automaker's common stock into two classes.
Greenlight manager David Einhorn told Reuters on Wednesday
the automaker has refused to allow him to present his proposal
to credit agencies for a formal review of how the plan would
affect the company's credit risk.
"We think the credit rating process has been unfairly
manipulated," Einhorn said. "We call on GM to allow us to work
directly with the credit rating agencies."
GM fired back that any suggestion the automaker had failed
to share Greenlight's proposal in full with the ratings agencies
was "baseless and irresponsible."
Einhorn went public with a proposal in late March that the
U.S. automaker create one class of stock that pays a dividend
and one that does not, but would be tied to GM's potential
The move would lower the company's cost of capital, improve
financial flexibility and boost market capitalization by as much
as $38 billion, Einhorn said.
No other GM shareholder has yet backed Einhorn's proposal,
with Warren Buffett's Berkshire Hathaway Inc remaining
GM has rebuffed Einhorn's proposal, saying it would not help
the automaker "sell more cars, drive higher profitability, or
generate greater cash flow." Both Moody's and Standard & Poor's
have declared such a structure could hurt its credit rating.
When asked whether Einhorn's claims on Wednesday changed
anything, an S&P Global Ratings spokesman referred Reuters to
the agency's previous opinion from late March.
The views of the rating agencies are a key element in the
proxy fight that will play out over the next several weeks,
unless GM and Einhorn can reach a settlement.
In the interview, Einhorn said his plan would also allow GM
to preserve more of its cash reserves, at a time when some
analysts are concerned the U.S. auto industry is heading into a
"Our proposal is an elegant way to unlock that kind of value
without drawing on the cash resources of the company," Einhorn
Greenlight Capital has owned GM shares on and off for five
years and now has a 4.9 percent stake, including options.
GM stock has performed poorly versus its peers and compared
with the broader market. GM shares traded on Wednesday afternoon
at $34 - just a dollar above the IPO price when the company went
public in 2010 after a government-led bankruptcy.
The disagreement became a full-fledged proxy fight on
Wednesday as Greenlight said GM's advisers had no interest "in
performing an objective analysis" of Einhorn's proposal.
In a regulatory filing, Greenlight said GM had then
"substantially altered" the term sheet for its proposal before
handing it to the ratings agencies and that this different
version included "various misrepresentations" of the plan.
GM said in a statement: "The rating agencies' public
statements issued regarding the Greenlight proposal clearly
indicate that they understood the idea in all its facets, and
would represent a credit negative if implemented. Any suggestion
to the contrary is baseless and irresponsible."
Greenlight on Wednesday nominated former AT&T Broadband
Chief Executive Officer Leo Hindery, longtime Greenlight
research director Vinit Sethi and Consol Energy Inc
Chairman William Thorndike to the automaker's board of
Einhorn himself was not on the proposed slate.
Sethi was involved in talks with GM on Greenlight's proposal
going back to last September.
Einhorn's fund has returned an annualized 16 percent since
the firm's launch in 1996 but its gains have been more muted
recently with an increase of only 1.5 percent in the first three
months of 2017.
Einhorn's fight with GM marks the first time since taking on
Apple Inc in 2013 that the closely watched fund manager
has pressed management publicly to make changes, taking a page
from the playbooks of so-called activist hedge funds like Jana
Partners and Pershing Square Capital Management.
GM has not yet published a date for its annual shareholder's
meeting, but in previous years it has usually been held in the
first half of June.
A majority of investors surveyed by Evercore ISI just after
Einhorn disclosed his proposal said it would not raise GM's
Greenlight's filing comes just two days after luxury
electric car maker Tesla Inc surpassed GM to become the
highest-valued U.S. automaker despite selling around 76,000
vehicles last year to GM's 10 million.
(Writing by Joe White; Editing by Lisa Von Ahn and Matthew