GM Bankruptcy: Publicis Says Its Exposure Is $78 Million

Announcement Comes as S&P Issues Warning on French Holding Company

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DETROIT ( -- Publicis Groupe said today its maximum financial exposure to its client General Motors Corp.'s bankruptcy filing is $78 million.

The French holding company's Starcom MediaVest Group is listed in the automaker's Chapter 11 filing as its sixth-largest unsecured creditor, owed $121 million and Publicis itself is 18th on that list, owed $25 million.

Publicis said in a release today from its Paris headquarters that the bulk of the amount owed to Starcom, which plans and buys media for GM, "reflects a conduit of funds to the media owners." The holding company is playing the "sequential liability" card, as Omnicom Group has done in Chrysler's Chapter 11. "Our agencies can only be held liable for payment of the invoices when acting in that capacity to the extent that they have been paid by GM," the Publicis statement said.

It's not crystal clear, but apparently the $78 million exposure is for GM's outstanding fees, possibly for creative, research or strategy, that are not covered under the sequential liability clause.

Publicis said that GM has asked the bankruptcy court to designate the holding company an "essential vendor," which allows for work and payments to continue through the Chapter 11 process.

"The agencies of Publicis Groupe which work with GM have been asked to continue to work with GM through bankruptcy and we expect out relationship to continue with the new company," the French company said.

Publicis' Leo Burnett USA, Troy, Mich., handles GM's Buick-Pontiac-GMC accounts, though the Pontiac brand is being eliminated, and Publicis' Digitas, Boston, handles much of GM's online work.

Separately, Standard & Poor's Ratings Services today placed Publicis on negative credit watch for its long-term corporate credit and senior unsecured debt due to GM's bankruptcy, saying it has "negative implications."

Standard & Poor's said it based the move on three main risks: GM could decide to break ties with Publicis after it emerges from Chapter 11; Publicis could carry financial exposure for its media buys for the client; and it could be hurt by "substantial losses" on outstanding receivables from the automaker.

But at the same time, Standard & Poor's also affirmed its "A-2" short-term corporate credit rating on Publicis.

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