GMAC Restructuring Leaves SmartNotes Holders in the Lurch

Many readers have been following the GMAC (GKM) bond saga - especially SmartNotes. The latest is that GMAC will restructure its debt to avoid bankruptcy, and that SmartNote holders (generally, mom and pop investors holding these through thick and thin for retirement) will be put at the back of the line to pick up the crumbs. Well, almost.

I expect GMAC to suspend the dividends on SmartNotes, but, in the words of a GMAC spokesperson, the principal will not be renegotiated. I reckon that SmartNotes are now zero coupon bonds, with the payoff at maturity being their $1000.00 per bond face value, if everything goes correctly. If GMAC goes belly up, all bets are off. Speaking of bets, I bet Congress will do absolutely NOTHING to protect the interests of SmartNote holders. With all the other bailouts occurring, this is a shame.

And speaking of shame, LandAmerica, the erstwhile gold-plated Title and Land Exchange company has completely screwed thousands of 1031 tax deferred property escrow account holders waiting to exchange property through their "top rated land exchange program" by selling the profitable portions of LandAmerica to Fidelity and throwing their 1031 tax deferred exchange investors who assumed escrow funds were held in trust for immediate release (so said the company) under the bus by declaring that portion of the company insolvent and throwing it into a Chapter 11 reorganization.

Clients were informed in a one page statement that the President of the company was "sorry" this happened, and referred the victims of this incredibly crafty screwing to a phone number, which repeated the letter in a Stalin-esque manner. If Congress ever wanted to investigate fraud and mismanagement of funds placed in trust, this would be it. Hundreds of millions of dollars placed in LandAmerica's 1031 tax deferred swindle are likely lost. To add insult to injury, any monies returned to the customers will receive a full tax treatment, blowing the 1031 intent.

There should be a special place in hell for politicians who will throw hundreds of billions into corporations, yet do nothing to investigate or remediate comparative injustice to smaller investors in schemes like those above.

Comments

[Noteholder:]

If true, why are SmartNotes due 12/15/2008 trading at 96-98% of par?

2008 Dec 03 10:54 AM

[Peter Wunsch:]

Thomas, I could not agree more about the shame of LandAmerica 1031. I was screwed in a similar fashion by a 1031 exchange company Vesta Strategies.

I've started my own 1031 exchange service called RockSolid 1031 dedicated to doing 1031 exchanges safely. I invest client money only in money-market accounts investing in government backed securities. This ensures that all money put in will be there to take back out.

1031 exchanges are such a simple concept. It is disgusting to see hard-working investors cheated out of their money by LandAmerica and others.

2008 Dec 03 11:18 AM

[JorgeAlberto:]

I am GKM shareholders (reffered stock) and know nothing about 1031 exchange service. What is it? Does have anything to do with us shareholders? Please let me have a link to learn about it.
As every GKM shareholders know already we are for a very bad landing. Well, what can we do? If GMK is not allow to become a bank we are more than lost. Good luck to all. George

2008 Dec 11 10:56 AM