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Michael Terry, CFA has nearly 20 years of experience in the investment management industry focused on the analysis, investment and management of fixed income and preferred stock portfolios. Over the years, Mr. Terry has analyzed and invested in both public and private companies around the world... More
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  • UAW = U Are Whole 3 comments
    May 26, 2009 2:03 PM | about stocks: GM

    UAW details are out, lets recap:

    • $10 billion in assets placed in trust;
    • $2.5 billion in a note payable (amortizes in 2013, 2015 and 2017);
    • $6.5 billion in 9% preferreds;
    • 17.5% of the restructured equity;
    • Warrants worth 2.5% of the company

    The UAW VEBA is owed $20 billion (depending on how you interpret it, over the remaining life of the contract, it is far less - and this is how it should be governed) and in return, they are receiving $19 billion in cash and securities, 17.5% of the company and warrants. 

    By BoneYard math, that is nearly whole.

    The other 19% that was on the table will be divvied up between the government and other creditors - no mention of those specific creditors (you know, the $27 billion in bonds that were offered 10% of the equity).

    Plus they will take back 5 Delphi facilities to help Delphi out of their little financial predicament.

    So much for the equal footing of unsecured creditors.  It gets more surreal by the minute.

     

    Disclosure:   Long GM bonds

    Stocks: GM
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This post has 3 comments:

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  •  
    I am sure the UAW will drive a tough bargin with the new owners. Oh wait...
    26 May 2009, 02:57 PM Reply Like
  •  
    Somebody with knowledge, please explain - why exactly would such a deal prior to a bankruptcy filing carry any weight in the reorganization?
    26 May 2009, 03:05 PM Reply Like
  •  
    It essentially is a prepackaged bankruptcy. As long as the creditors are on board, it makes the process quicker as the bankruptcy plan (and hence, how the company will emerge and in what form) is known before the company enters the proceeding. Unfortunately, only the sale of the good assets is known, so the "363 sale" becomes the plan. That and, in this case, it makes it appear that laws governing bankruptcy aren't getting trampled.
    29 May 2009, 12:02 PM Reply Like
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