GM Secured Lenders To Not Be Impaired

As Zero Hedge previously noted, and the WSJ now reports, GM secured lenders will get full recoveries on their loans, which is not to say full cash repayment but rather a notional roll into "Good GM" at par value. This is not surprising, seeing how the secured loans at GM are not the fulcrum security (unlike at Chrysler), however the major haircuts at the unsecured, bond level will prove to be a much more relevant issue for the expediency of the bankruptcy case. It is not so much the treatment of the above-fulcrum security that is a concern (either in this bankruptcy or any other), but the level of projected recoveries for the fulcrum, the residual for the securities below and the level of fulcrum holdouts.

In the meantime, GM's Term Loan, whose recent chart is presented below, today hit a level of 85, which is likely a fair value for when it rolls into a presumably leaner and much less indebted Good GM post bankruptcy. As the U.S. Government-sponsored DIP financing, which according to media reports, could be up to $30 billion, will likely be "forgiven" upon emergence, it is only logical that the TLs, which have a high likelihood of being the only debt post emergency, should trade at or near par values.

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