PTFOA Bribes Bondholders With 15% Extra Stake in Post-C11 GM

Robert Farago
by Robert Farago
ptfoa bribes bondholders with 15 extra stake in post c11 gm

As GM augers-in for its Chapter 11 face plant, the Presidential Task Force on Autos (PTFOA) has been busy cutting back-room deals with bondholders. Reuters reports that the feds are getting their proverbial ducks in a row for a fast-track fustercluck—sorry, reenergized company. “Under the proposed deal, which is supported by major institutional creditors holding about a fifth of its debt, bondholders representing $27 billion in debt would be offered 10 percent of a reorganized GM — the same stake they had been offered previously. In a sweetener, bondholders would also receive warrants to acquire another 15 percent of the equity in the new company, provided they support a quick Treasury-backed sale process similar to one now being used for rival Chrysler.” GM has released a statement on the new plan, removing any last traces of doubt that it’s headed for the world’s largest bankruptcy proceeding . . .

The U.S. Treasury proposal announced today provides incentives for GM’s unsecured bondholders to support GM’s restructuring efforts in the event GM decides to pursue a 363 sale as part of a bankruptcy proceeding. Implementation of this proposal would result in a New GM with a healthy balance sheet, putting the new company on a clear path toward long-term viability and success. GM appreciates the unwavering support of the U.S. Treasury and the President’s Task Force on Autos and thanks the unofficial committee of bondholders for their support of the proposal.

So, did the PTFOA express its “support” for “new” GM with a threat or a promise? Yes!

Bondholders would have until 5 p.m. EDT on Saturday to indicate they would not oppose the sale process as planned, GM said. If bondholders do not provide those indications, common equity and warrants “would be substantially reduced or eliminated.”

Which tells us that GM—well, the PTFOA—has decided to wait ’til Sunday to file for bankruptcy. Anyway, needless to say, the majority of GM’s bondholders (some of which are into the TARP program for billions) immediately caved.

A committee representing the major bondholders said they supported the revised offer as the “the best alternative … in the current difficult and dire situation.”

What else could they say?

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  • on May 28, 2009

    guyincognito : Well said. I’m still trying to grasp how the government gets 72% the union gets 17% and the bondholders get 25% of the new company. -- Treasury 72% Shareholders 1% Union 17% + $10 billion cash and notes Bondholders 10% plus warrants of 15% to buy basically from Treasury 72+1+17+10= 100 Treasury is is largest lender and will provide DIP financing, effectively making this a huge cash burn. They are arrogant and have tried to control the bond market. The bond market(BM) is bigger than the Treasury actually and the BM is saying screw you Obama to union workers since Obama is destroying contract rights by disregarding secured creditors. Look at the spreads in the BM, industries with union selling bonds are not being bought. The BM will not buy GM bonds, the company is completely dead thanks to Obama and his union hardon. He can blame hedgefunds all he wants, screwing up the market rules for social justice for unions on this scale is stupid if in the long run there is a net loss. Watch the interest rates march up now. The Treasury's bond market bubble burst last week. Depression full steam ahead....

  • U mad scientist U mad scientist on May 28, 2009
    There are laws to protect investors and creditors in bankruptcy so they don’t get completely fucked, can anyone explain why the PTFUA is allowed to ignore them? No laws are being ignored. The morons who claim this were asked to show which laws were violated and no takers in the weeks they've continued to assert this. Adjust regard for those people accordingly. - He can blame hedgefunds all he wants, screwing up the market rules for social justice for unions on this scale is stupid if in the long run there is a net loss. For a law stud you sure like to ignore the law. Here's a breakdown of BK rules in case they didn't cover them in remedial classes, presented so even morons can understand: Chap7, liquidation, everything gets sold for X dollars, split according to priority rules Chap11, reorg, S363, similar except new company is formed to buy assets for about same X dollars, split according to priority rules. The bondholders got everything they were entitled to. Nobody in chrysler's case can argue X was over 2bil. Anything and everything else involving New Chrysler including hookers and booze for the UAW is prerogative of DIP financiers separate from whatever bondholders want. Remember who fooled you into mixing the unions into the straight up bond deal. The pathological liars who are source of this should be mocked mercilessly.

  • Kat Laneaux Agree with Michael500, we wasted all that money just to bail out GM and they are developing these cars in China and other countries. What the heck. I understand the cheap labor but that is just another foothold the government has on their citizens and they already treat them like crap. That is pretty disgusting to go forward to put other peoples health and mental stability on a crazy crazed, control freak, leader, who is in bed with Russia. Thought about getting a buick but that just shot that one out of the park. All of this for the greed. They get what they lay in bed with. Disgusting.
  • Michael500 Good thing Obama used $50 billion of taxpayer money to bail them out and give unions a big stake. GM is headed to BK again with their Hail Mary hope of EVs. Hopefully a Republican in office will let them go BK the next time, and it's coming. The US economy is not related/dependent on GM and their Chinese made Buicks.
  • MaintenanceCosts "Rural areas hardly noticed COVID at all."I very much doubt that is true in places like the Navajo Nation or the Kenai Peninsula in Alaska, some of which lost 2% or more of their population to COVID.No city had a death rate in the same order of magnitude.Low-density living is a very modern invention. Before cars, people, even in agricultural areas, needed to live densely to survive.
  • Wjtinfwb Always liked these MN12 cars and the subsequent Lincoln variant. But Ford, apparently strapped for resources or cash, introduced these half-baked. Very sophisticated chassis and styling, let down but antiquated old pushrod engines and cheap interiors. The 4.6L Modular V8 helped a bit, no faster than the 5.0 but extremely smooth and quiet. The interior came next, nicer wrap-around dash, airbags instead of the mouse belts and refined exterior styling. The Supercharged 3.8L V6 was potent, but kind of crude and had an appetite for head gaskets early on. Most were bolted to the AOD automatic, a sturdy but slow shifting gearbox made much better with electronic controls in the later days. Nice cars that in the right color, evoked the 6 series BMW, at least the Thunderbird did. Could have been great cars and maybe should have been a swoopy CLS style sedan. Pretty hard to find a decent one these days.
  • Inside Looking Out You should care. With GM will die America. All signs are there. How about the Arsenal of Democracy? Toyota?