Monday, June 1, 2009

First Splinter Bondholder Committee Formed In GM Bankruptcy

In the first bondholder splinter group in the GM bankruptcy, today Paul Weiss filed a statement under rule 2019, creating an informal group of bondholders. The four initial members hold $1.6 billion face in notes, and were previously members of the HLHZ-advised ad hoc committee, which was instrumental in attaining to the highly questionable 54% of plan supporters. Now this is actually interesting, because the $1.6 billion is a good 6% of GM's $27.1 bn in unsecured bonds. As everyone knows, Obama claims he has the support of 54% of bondholders: if these 6% have decided to split from the ad hoc supporters and go against the grain, this effectively shifts the balance of power back to those bondholders who disagree with the plan .

The initial members of the committee are:

Franklin Templeton Investments
Marathon Asset Management
JMG Capital Management, LLC
Eastbourne Capital Management, LLC

It is unclear if these four funds had previously voted "for" the S-Rat plan, but have subsequently gotten cold feet, and as a result are forming their own independent committee, or have been an independent splinter formation all along. It is certain that Paul Weiss' lawyers are currently ringing each and every bondholder's phone off the hook in order to canvass for more informal commttee members, not in the least since the legal fee is split pro rata between more parties. As a public service to our GM bondholder readers, if you believe you wish to hire representation and the 10% recovery you are getting does not seem like the great deal our President tried to sell it on TV, feel free to contact Andrew Rosenberg of Paul Weiss at (212) 373-3000 or email him at

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