Sunday, March 22, 2009

GM Bondholders Threaten With Bankruptcy Unless They Get Attention

GM's bondholders have had enough of being ignored. In a letter released minutes ago, the ad hoc bondholder committee claims that on March 5th it had presented a framework for "constructing a successful debt-to-equity exchange to the Presidential Task Force on the Auto Industry." While it is unknown what the presented framework consisted of, the bondholders are "disappointed" that they have had no response yet from either GM or Steve Rattner's task force. And the tone of the letter gets uglier:
"We believe that, unless the framework we suggested is utilized, the restructuring currently contemplated will not achieve the required level of acceptance to succeed on an out-of-court basis. The result of such a failed exchange would likely be a bankruptcy that would have dire consequences for the company, the tens of thousands of hard-working Americans that GM employs and the economy as a whole."
The reason for bondholders' unhappines is that not only have their opinions not been met with the proactive attention that both GM and the UAW have been receiving from the administration, but also "bondholders have een asked to make deeper cuts than other stakeholders. All other parties will walk away with far more."

The letter concludes by saying that bondholders "hope that others involved in this process believe that beginning a real dialogue with the bondholders is more likely to lead to a successful restructuring of GM than engaging in public critcism of the bondholders' legitimate concerns." Nothing like a little hot potato on a Sunday afternoon.

Signatories to the letter are Eric Siegert from Houlihan Lokey, financial advisor to the ad hoc group, and lawyer Andrew Rosenberg of Paul Weiss, both of which firms stand to make a killing if GM does truly end up in bankruptcy due to the many years of monthly and otherwise fees they stand to pocket.

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10 comments:

Anonymous said...

Hooray for bankruptcy. Bankruptcy is the only way to protect the taxpayer's interest from illegal subsidies to cronies of politicians.

SolPrizant said...

looking for identity of
ad hoc committee of General Motors bondholders

Anonymous said...

gross naivety here

do GM Bondholders have any idea how little they will recover if they push the company into bankruptcy

be careful what you wish for

Anonymous said...

gross naivety here

do GM Bondholders have any idea how little they will recover if they push the company into bankruptcy

be careful what you wish for

Anonymous said...

The large (institutional) bond holders stand to recover 100% (minus the cost of their CDS.

THAT is the problem that the administration, UAW, shareholders and even retail bondholders have to worry over.

It's a subtle game almost, but the administration is about 3 moves from check-mate.
----------------

re:do GM Bondholders have any idea how little they will recover if they push the company into bankruptcy

be careful what you wish for

Anonymous said...

Although...

If B.O. had some testes, he might threaten the whole structure of default swaps, and let AIG (finally) go down (just as soon as GS gets their last payment of course!).

Of course there is an empty sack.

Advant Guard said...

The bond holders can threaten bankruptcy but they can not trigger it until GM misses a debt payment. The U.S. Treasury is the one that can trigger a bankruptcy and the bond holders are over playing their hands. They can negotiate with GM but it is the Treasury that is in the driver seat.

As I noted on my blog, the Treasury can easily execute a cram down on the bond holders. It is just a question of they want to tighten the screws on the various GM stakeholders.

Sol said...

Some of us were looking for stability, the same as the UAW.
If they can get a 66% retention of benefits, why is it that the B.H. are being left to die with no solution in sight. My take is, If we do not get some semi satisfactory results, we petition into Bankruptcy, at least we could be in the driver seat in the new restructuring process, and get whatever we can fight for.

Anonymous said...

I'd side with the bondholders on this. They only get one bite at the apple whereas the UAW can always renegotiate in the future if GM survives.
Also, they are being asked to take 33 cents on the dollar in bonds that will be BEHIND all the government money. If those are the terms better to go for a prepack or bankruptcy where you will be on equal footing with the other creditors.
If the government just gave them 33 cents on the dollar in guaranteed debt I'm sure they would take it.

Anonymous said...

I"d love to know when the bondholders bought their bonds. It's not like these are long-term guys who have had a stake in GM forever and rode it down. They are distressed guys, who bought in when and knowing the company was in trouble.

It's like buying a 20-year-old burned-down house from a third party and suing the former builder to make you whole.