By Michael Flaherty and Ankit Ajmera
(Reuters) - Greenlight Capital escalated its battle against General Motors Co (N:GM) on Thursday, posting credit ratings documents that it said the automaker inappropriately changed to undermine the hedge fund's proposal to create two classes of GM stock.
Greenlight, which owns 3.6 percent of GM shares, has said its dual share plan would boost GM's value by creating 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, which it said was given to the agencies, along with 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 has said 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.
Ratings agencies have sided with the company in ruling that the dividend class functions like a debt security, which could affect 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, a statement that Greenlight took issue with in a late afternoon response.
"Greenlight’s claims regarding GM’s engagement with the rating agencies relative to Greenlight’s Dividend Shares proposal are baseless..." GM 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 2010.