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Statement From Screwed GM Bondholders

A press release, via the Wall Street Journal:

The General Motors Pontiac Assembly plant is seen in Pontiac, Michigan April 26, 2009.

Statement from advisors to ad hoc committee of GM bondholders

APRIL 27, 2009

We are deeply concerned with today’s decision by GM and the auto task force to offer only a small, inequitable percentage of stock to its bondholders in exchange for their bonds.

We believe the offer to be a blatant disregard of fairness for the bondholders who have funded this company and amounts to using taxpayer money to show political favoritism of one creditor over another.

Today’s posturing makes it clear that the company and the auto task force would rather discount the thousands of individual investors and retirees who own GM bonds than undergo earnest negotiations.

The current offer is neither reasonable nor adequate. Both the union and the bondholders hold unsecured claims against GM. However, the union’s VEBA would receive a 50 percent recovery in cash and a 39 percent stake in a new GM for its $20 billion in obligations; while bondholders, who own more than $27 billion in GM bonds and have the same legal rights as the unions, would only receive a mere 10 percent of the restructured company and essentially no cash.

The offer was made unilaterally, without any prior discussion or negotiation with bondholders and in spite of repeated calls for dialogue.

Bondholders and GM have the same basic goal – to restructure the company in a consensual manner, thereby creating a leaner, more competitive GM. In order for GM to emerge from this restructuring process as a profitable entity, all stakeholders should be prepared to make deep, yet equitable, sacrifices. Bondholders remain willing to make such sacrifices and ask only that others do as well.

We are deeply concerned that GM waited until late April to make its offer. GM CEO Fritz Henderson even admitted that getting 90 percent of the company’s bondholders to agree to a debt exchange within a month would be ‘a tough task,’ given the company’s large amount of retail investors, who hold some $6 billion in bonds.

This offer demonstrates that the company and the auto task force, unfortunately, are pinning their hopes on an extremely risky and legally questionable turnaround in bankruptcy court, instead of engaging its lenders and workers in the very type of negotiations that could avoid such a fate.

Welcome to the new Soviet Union.

This article was posted by Steve Gilbert on Tuesday, April 28th, 2009. Comments are currently closed.

5 Responses to “Statement From Screwed GM Bondholders”

  1. curvyred

    Seems to me like Father Phlegm and Rev Wrong’s dreams are coming true: “take their money away”

    Is this really happening in our country? I get more and more frightened every day – and I am not generally an alarmist.

    What’s next confiscating our 401k’s?

    • eucher

      Why not? Our President made it known he wants to spread your wealth around. Not his own, mind you, but definitely yours.

      Rush called this last December. Today he said, “What has just happened is that Don Obama has made Don Corleone look like Daffy Duck. Don Corleone was nothing compared to Don Obama. You want to talk loan sharking? Let me tell you how this loan sharking worked. Bondholders, people who purchased General Motors bonds, did so to the tune of $27 billion. Big government, Don Obama put up $15 billion, just a tad less than that. So basically the private sector bondholders put up almost twice as much money to save General Motors as Don Obama did. And at the end of the day, Don Obama gets 50% of the company, and the bondholders get 10% of the company. The bondholders put up twice as much as Don Obama, and Don Obama gets half the company; the bondholders get 10%.”

      He also said “The government is about to take over GM in a plan that completely screws private bondholders and favors the unions. Get this: The GM bondholders own $27 billion and they’re getting 10 percent of the common stock in an expected exchange.

      “And the UAW owns $10 billion of the bonds and they’re getting 40 percent of the stock. Huh? Did I miss something here? And Uncle Sam will have a controlling share of the stock with something close to 50 percent ownership (in GM), and no bankruptcy judge. So this is a political restructuring run by the White House, not a rule-of-law bankruptcy-court reorganization. Meanwhile, top Obama adviser Valerie Jarrett opened the door wide on CNN yesterday to bank nationalization and CEO firings.” Now, these stress tests are coming out of the banks, and guess what? Citibank may need more money. The stress tests, exactly as I called them last week, are possess tests. The stress tests are possess tests! More government ownership, more government control of the banks. The UAW, the unions, now get the official payback for all these years of supporting Democrats and President Obama.”

  2. Reality Bytes

    Now you know how the German Jews felt. Hey, it was about fairness against greed then too right?!

  3. GetBackJack

    Where is our military in all this?

    They are SWORN to uphold and defend the Constitution, and they’re totally absent, completely silent and utterly off the stage. If the military of the United States won’t step in and stop this Sovetizing of private industry, then I swear an oath against them.

    Seriously, where’s our last line of defense against usurpation of the Constitution?????

    • DoctorRock

      I got that right her for you, Jack!
      “A well regulated militia being necessary to the security of a free State, the right of the People to keep and bear arms shall not be infringed.”
      Our ORGANIZED military is pretty busy right now, God bless ‘em, and are obligated to pretty much do as our government sees fit. That’s why our Founding Fathers made a point of enumerating our right of resistance.
      You could say “WE’RE THE MILITIA WE’VE BEEN WAITING FOR”, but that’s a little cheeky.




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