User 386342

Chrysler Lenders (Non-TARP) Come Out with Guns Blazing

Oregonian: The non-TARP group sought to negotiate an out of court deal with the task force after the TARP lenders folded. Their opening bid was for them to take a 40% haircut. That was "flatly rejected or ignored" according to the group.

GM Restructures Debt to Avoid Bankruptcy

The terms of the bond exchange provide for 225 shares of NYSE:GM for each $1,000 in principal debt exchanged, which one might argue at todays stock price equates to $0.40 on the dollar, but before the shares are issued, they are subject to a 100 to 1 reverse split with fractional amouts rounded down. Do the math. That means those 225 shares become 2 shares.

Anyone suggesting bondholders are being offered 40 cents on the dollar is suggesting NYSE:GM stock, now trading around $2.00 per share will, after the exchange trade for around $200.

Also, look at the ratios. Why, if bondhlders can really expect a 40% recovery of $27 billion from 10% of the new equity does the government divide 90% of equity to themselves and the union to cover only $20 billion of the combined government bridge loan and VEBA settlement? They issue themselves nine times the equity to cover less debt than the bondholders are owed.

By the 40 cents on the dollar math, the government should see a huge windfall with their shares, no?

The offer is deceptive and is not being accurately described by media. What ever happened to fiduciary duty to creditors in the insolvency zone? And despite government's claims to the contrary, they are NOT the largest lender to GM. The bondholders are far and away GM's biggest lender - and not with bridge loans to an insolvent GM either.

(Patiently awaiting due diligence FOIA requests by responsible parties on Executive Branch management of GM in advance of the landmark courtroom battles sure to come. Either we now live in a country where the government can just barrel in a dictate terms, or we still have a Constitutional republic that limits the powers of government to effectively sieze property without just compensation)

Pax et bonum

GM Bondholders: No Good Answer

Worse than 225 shares of common for $1000 in unsecured debt - the stock is immediately subject to a 100 to 1 reverse split before issue to the bondholder, so that 225 becomes only 2 shares of GM stock - probably trading for more than $2, but certainly not in the neighborhood of $150-$200 per share. See the prospectus. It's noted in a few places, but this one provides the complete example, page xvi: "1,000 U.S. dollar equivalent amount of old notes would be exchanged for 225 shares of GM common stock, which would be converted to 2 shares of GM common stock after the reverse stock split and the rounding down of fractional shares occur."

No love there.

Pax et bonum

Whither General Motors' Stock?

GM has 610 million shares outstanding with a market cap around $1-2 billion. Initial loan terms stipulate 2/3 of $27 billion in bondholder debt and another $10 billion in VEBA debt be converted to equity. Talk now is minimum 3/4 for the bondholder debt to equity and more concessions on the VEBA payment. 30 billion shares outstanding anyone? Reverse-split at maybe 100 to 1?

At this point we're likely to see a prepack that wipes away the existing 610 million shares, with the issuance of new equity to the bondholders (4/4 debt to equity bond exchange) and the UAW as GM emerges with only government debt on the balance sheet, half of which we might see paid off with a new bond offering down the road, after the first half is paid back.