Bailout Watch 451: GM Bondholders' Letter to PTFOA
We’ve been hearing a lot recently about GM bondholders’ unwillingness to take the haircut offered by The General—a precondition for federal loans. Ha! Got you! It was supposed to be a precondition. Uncle Sam blew through the first deadline as if that check box didn’t even exist. As the The Presidential Task Force on Automobiles (PTFOA) prepares to dish-up a second helping from the bailout buffet, GM bondholders are tooling-up for next week’s PR war. The “unofficial committee’s” letter to the PTFOA [full text via Reuters] kicks off with the Cerberus defense: ” . . . many of these bonds are owned by average citizens, who purchased them to support their own retirement and college expenses and other critical needs.” As we said when Chrysler’s owners assumed this position, bullshit. As the letter acknowledges, 80 percent of this debt is held by institutions. Meanwhile . . .
We do not know if the plan would, in fact, keep the company out of bankruptcy (in which case the securities received by the bondholders in an exchange would likely be worthless and the retirement funds and other who counted on these securities would be left with nothing.
True, but please. [See: above] And then, the bombshell. (Ish.) The bondholders report that they presented an offer to the PTFOA and never received a reply. So much for negotiations, then.
Is the PTFOA about to launch a PR campaign against the bondholders, hoping to beat them into submission using the greedy Wall Street bastards meme that’s gripped the MSM? it sure looks that way.
I almost forgot: the bondholders have turned down an offer of 33 cents on the dollar on about $27B in GM debt. If GM went C7, they’d bank over 50 cents on the dollar. And it’s worth noting that the bondholders have suggested—publicly—that they’d be far more amenable to the 33-cent offer if Uncle Sam (that’s you) guaranteed 100 percent of the debt. Yeah, no NSFW.
More by Robert Farago
Comments
Join the conversation
Re:WSN You sound a little bitter "I won’t allow anyone else to take advantage of me, even if my bond goes to zero."- however you do have a point...... There is a reason GM bonds trade at approx 30 cents of face value - they're risky. The moment the Gov't steps in and removes that risk (by way of a loan guarantee) said risk is reduced/removed and the their value will rise significantly. I - like many here at TTAC - have little to no doubt the Gov't will do exactly this. The rationale being "Guarantee's don't cost any money - for now..." So yes, I agree. If you bought GM bonds @ 30-50 cents on the dollar you are going to make a killing. Hookers and Coke for everybody! BTW. Does anyone know what the various GM bonds are trading at right now?
It is the shareholders own fault. I actually read the annual reports from the companies I own stock in, and if I am dissatisfied with the BOD, I vote "no" on the election question on the proxy ballot that comes with it. Sadly, most shareholders do neither. Since an absent vote counts as a yes vote on most proxies, the shareholders that don't bother to read or vote continue the same BOD and policies year after year. If the average person got more involved, and actually VOTED, the BODs in the various companies might get nervous and change things.