GM's Do-or-Die (Mostly Die) $27 Billion Debt Exchange
If 90 percent of GM’s bondholders don’t exchange, GM’s bankruptcy is a done deal. In other words, it’s a done deal. Or, as GM CEO Fritz Henderson said, it’s “more probable.” [ Download pdf here.] How’s this for investor appeal? “If we seek bankruptcy relief, you may receive consideration that is less than what is being offered in the exchange offers and it is possible that you may receive no consideration at all for your GM notes.” And here’s a wrinkle TTAC’s Ken Elias has brought to our attention: the offer treats all bondholders the same, regardless of when their notes come due. “That’s because there’s no way to negotiate with different classes of bondholders outside of bankruptcy.” Ken reckons all of this is just window dressing: “They’re just softening-up the battlefield for a Chapter 11.” And here’s the really strange bit: GM’s stock went up 40 cents on the news. As Mandark would say, Haa ha haa, haa ha ha ha ha! Only, it’s not so funny, really.
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The point is to blame the whole thing on the bondholders when in reality, they are the not only the scapegoat, but the sacrificial lamb. It doesn't matter whether you blame management, the UAW, or the government, these are the people who are being protected at that cost of the taxpayer, stockholders, bondholders, competitors, consumers, and other creditors.
Its still a bluff. The government isn't going to bring this to the courts, they already own the company, and can set whatever terms they want. Why let a possibly impartial judge get in the mix?