- $0 new cash
- $0 new debt
- 10-20% of the company stock.
This is a dramatic deterioration from the old proposed offer (which bondholders were not happy with in the first place):
- 8 cents cash
- 16.5 cents new debt
- 90% of GM stock
The revised terms are based on the auto task force's determination that due to deteriorating economic conditions, the initial offer to bondholders had been far too generous. Bondholders are guaranteed to balk at this offer, with the government likely to end up getting a super secured position via a DIP, thus cramming down the bonds even more in bankruptcy... Of course, the tables would turn if the administration truly has an ulterior motive of equitable subordination of its claim as ZH speculated. Sphere: Related Content
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9 comments:
Tyler - what are your thoughts on theories the bondholders would like to see bankruptcy so they could get paid on the CDS?
and to add to the question:
how many of those CDSs are written by AIG?
The question is how many of the official creditor committee will have CDS hedges. my guess is not that many
GM 5Y CDS +2-3pts today to 86/88, and short-dated (12/20/2009) at 77/82% - on a quiet day, these are reasinable moves that we hear have some volume behind them - I suspect that if the bond guys did NOT have hedges in place, they do now...look out below...
This also means the current shareholders are at zero?
a bankruptcy wipes out existing equity
"a bankruptcy wipes out existing equity"
Wow. I hope you're just referring to your analysis of the autos...
I bet the bondholders feel pretty stupid now. How could they possibly not be satisfied with that last deal? It amounted to basically the whole company as far as I can tell.
This means that future negotiations of this type will be easier, as the bondholders will be more fearful.
aig/us will make bondholders whole...plus they get the new stock
btw WFC ? give the $ back....
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