• Apr 12, 2009
GM's most recent offer to its bondholders offered a little bit of cash and a little bit of equity. GM CEO Fritz Henderson's example was that a holder of $1,000 in bonds would end up with $333 and a some equity. After conferring with the Auto Task Force, however, that offer was deemed excessive in light of GM's situation so a new deal is being readied for bondholder approval.

In Henderson's words, "That equity is part of the offer." What he might actually mean is that equity is the offer. CNBC reports that the "Treasury Department wants GM to offer its bondholders a small amount of its stock in exchange for their $29 billion of GM debt."

Having turned down much better offers, we don't expect bondholders to signal approval now. From the outside this looks to be a showdown: GM has appeared to accept the prospect of bankruptcy, and while it wants to tend to business out of court, it will enter a pre-packaged Chapter 11 if necessary; bondholders appear to be looking at The General as if it's got a gun to its head, and they're waiting to see what happens when the trigger gets pulled. We don't have much longer to wait...

[Source: CNBC]


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  • 41 Comments
      • 5 Years Ago
      This is just a very bad soap opera.
      I still say the Bilderberg's are in control. To the BIG money it is all a game.
      We pay.
      • 5 Years Ago
      IJ70 you forgot one.......

      Lousy vehicles!
      Lousy in the 60's
      Lousy in the 70's
      Lousy in the 80's
      Lousy in the 90's
      Lousy now!

      Gimme Motors has been bankrupt for years, they are simply going to make it official soon. Good riddance to bad rubbish!
      • 5 Years Ago
      I really don't understand the hate GM, hate America mentality I see from some people here. I believe Buick was found to be the highest quality car lately.

      GM certainly hasn't always represented quality, engineering, efficiency, etc., but right now they seem to be doing a decent job. How long does it take to live down a questionable reputation??

      It seems to be the latest fad around here to dump on anything American, especially GM.

      I certainly don't believe that GM isn't building the cars the public wants! They build lots of vehicles that sell very well. I think a lot of "greenies" don't want to admit that Americans like pickups, SUV's and cars that are at least midsize or better.

      The last few times I've looked for a car, I've considered GM models. Doesn't everyone? If not, why not? Of course, I didn't buy GM, but I did buy 3 Fords and a Honda (all four were practically trouble free).

      Wake up, the next bankruptcy could be your employer.

        • 5 Years Ago
        ij70,

        GM is a US based company. It bought Saab, and made other investments because it hoped to make money. GM is multinational and has businesses in other industries as well as building cars. Yes, but it sounds like you hold these two facts against GM. Why would you? GM got to that scenario because it was successful.

        "GM has been declining for several years now". Really? I would say GM has been declining for several *decades*. However, their products have improved greatly in recent years. How long do you plan to hold the old bad days against them? I mentioned Buick above as an example of quality. There's Cadillac, Chevy Malibu, several highly competitive trucks and SUV's, etc. They will be bankrupt soon. Will you support the company out of bankruptcy?

        I would ask you and others to rethink your position. Soon. Otherwise, there will be
        no American automobile industry. Just imports - even if they have plants to assemble
        cars here.


        • 5 Years Ago
        I do not hate GM. I have no reason to. It is a failed company. It will file bankruptcy by the end of this year.
        • 5 Years Ago
        We do not hate GM.

        We hate the lies.
        1) GM is not an American company, it is a multinational corporation with factories on just about every continent. It is also not a car company. GM has many businesses now, car building is just one of several.
        2) GM has been declining for several years now. An ethical and responsible management would have changed the company even if the changes are painful. Instead the management of GM has been continuing "business as usual" and now the failure is so much bigger, so much more painful, so much more disruptive.

        Let me ask you a simple question. Why did GM buy SAAB? What necessity existed? Who forced them? The answer is: no reason, nothing, nobody. This is the kind of behavior we hate.
        • 5 Years Ago
        I used to buy nothing but domestics. Then I moved and the only reason I went to Honda was the dealership experience where I live. Very poor facilities, salespeople, and customer service. I have never had a huge problem with any new car I have purchased, import or domestic brand. I am unlikely to buy domestic when the closest domestic dealer I would do business with is 45 miles away.
      • 5 Years Ago
      Regardless of what decision they make, I do hope GM will be around for many more years to come.
      • 5 Years Ago

      I don't understand how Ford was able to retire almost $10b of debt and was over subscribed on the offer. But GM has not been able to do anything with their bondholders. I'm sure there are some GM bondholders that also had bonds with Ford. I wonder if they took the Ford deal?
        • 5 Years Ago
        GM has much bigger debt then Ford. That is why GM can not claw their way out of the hole.

        Also, Ford is much tidier company, they have fewer brands and it appears they have slightly more competent management when compared to GM.
      • 5 Years Ago
      who is representing the bondholders? I am just wondering if there is a unified bonderholder in the neogotiation. It seems it's inevitable that the General goes to bankruptcy.
        • 5 Years Ago
        "What gets me here is that Treasury is calling the shots in on the 'negotiation'. Treasury has other motives than keeping GM alive. They shouldn't be calling the shots."-------------But Treasury owns a chunk of GM, so they as co-owners can do what they want, fire CEO, take company in CH 11 or whatever. GM knew what was coming when they said YES to free money.
        • 5 Years Ago
        Carl, many think that GM bondholders are these evil hedge funds and big corporations, read this story on WSJ who else owns them.


        By LARRY LIGHT

        Five years ago, Marjorie Holden paid about $40,000 for some General Motors Corp. bonds, which generate tidy interest ranging from 7.4% to 8.4%. Now the bonds are worth just under $10,000.

        The 81-year-old New York widow is watching the negotiations among big, powerful bondholders, the government and the auto unions, which could end up in a settlement leaving her worse off.

        "The bondholders are not all rich," says the retired teacher. "I need to conserve my assets."

        Thousands of mom-and-pop investors like Ms. Holden own GM bonds, but have seen their value fall along with the fortunes of the auto maker. Just this week GM brought a much tougher offer to bondholders -- to swap their bonds for a small slice of the company's stock.

        In talks with GM, a committee of big institutional bond investors has been resisting a settlement. Previously, the company offered a sweeter package that included cash, new bonds and a lot more equity. The latest offer has small bondholders fuming and adds to their feeling of helplessness because the outcome is beyond their control.

        "I'm not doing the negotiating here, but why is the company doing this to me?" says Bob Pandolfi, 68, a retired stockbroker from Staten Island, N.Y., who has seen his $50,000 investment in GM bonds in 1999 plunge to one-tenth of that.

        About 20% of the GM bondholders are individual investors. Some like Ms. Holden or Mr. Pandolfi bought GM bonds when the auto maker's prospects were much better. This icon of corporate America defined safety to many of them. The bulk of the unsecured bonds, which have a face value of $29 billion, are worth about 15 cents on the dollar.

        Other individual GM bond investors are playing the vulture game with the Wall Street pros, trying to benefit from temporary increases in bond prices. That is easier to do with GM because the company has "retail bonds," which have a face value of only $25, and thus are more affordable and liquid than regular bonds, whose face value is $1,000. The GM retail bonds now trade for $2 to $4 each.

        David Berger, 36, a Manhattan commercial real-estate broker, says he has made money over the past few months trading in and out of these securities. In March, he had a stake totaling $500,000. Because he has bought so low, they offer a 80% yield. "It's nice to ride the wave," he says.

        The situation is grimmer for individual investors who own GM common stock. GM's shares closed at $2.04 Thursday, down from $83 a decade ago and its recent high of $42 in October 2007. If GM ends up in Chapter 11 bankruptcy-court protection, odds are the common stock will be wiped out. But if it can reorganize out of court, lightening its debt load via some kind of exchange offer, the stock likely will rise.

        Some small stockholders stay with their shares, but others got in lately and hope to make a profit from even a small bounce in GM's stock. Amid relative optimism about GM, the stock rose from $1.45 a share on March 6 to $3.62 on March 27. It then dipped after the ouster of GM's chief executive, Rick Wagoner.

        Dorothy Donovan, 77, who owns a catering business in Farmingdale, Mich., last year bought 200 shares, and is standing pat, thinking that "eventually, GM will turn around."

        Many bondholders also are hanging on in hopes that -- some way, somehow -- their losses will eventually be eased via an exchange offer for their bonds.
        But in the political and economic maelstrom swirling around the car company, they may be disappointed. The bondholders could be forced to swallow deeper losses than the market has delivered. Moreover, if GM files for bankruptcy protection, it almost surely will cease paying interest. Plus, in a bankruptcy, bondholders will have to wait a long time for a settlement. The typical bankruptcy lasts 18 months.

        In a few bankruptcies, bondholders emerge ahead. One example is Mirant Corp., a power-generating firm whose fortunes improved while it was in Chapter 11. Mirant gave bondholders a settlement worth more than the bonds had been worth.

        However, that's the exception. GM's fortunes are dwindling. The unsecured bondholders -- their paper isn't backed by collateral -- rank lower on the food chain than do other creditors.

        "They'll get what's left over, and the pie is shrinking along with GM's sales," says Peter Chapman, president of Bankruptcy Creditors Service Inc., a research house.

        Harley VanDeloo, 69, a retired high-tech marketing representative in Thousand Oaks, Calif., bought $20,000 in GM bonds a year ago, now valued at less than $3,000. Says Mr. VanDeloo, "I
        • 5 Years Ago
        I guess that kind of stuff only works with big business and government. There's no way I could get out of my debt by offering a mere pittance to whom I owe.
        • 5 Years Ago
        Here's the link to the story, which includes pictures


        http://online.wsj.com/article/SB123940497568709785.html
        • 5 Years Ago
        stocks, bonds, etc are all just legalized gambling.... so yeah, sometimes you lose. sucks for the people who lost a lot of money, but it takes losers to make winners, so expecting to always win is just ridiculous
        • 5 Years Ago
        Sea Urchin:

        There may be lots of small holders out there. But the bulk of the value of these bonds is with large institutions, I guarantee you.

        And they are the ones who are, in effect, bargaining for the rest of the bondholders.

        What gets me here is that Treasury is calling the shots in on the 'negotiation'. Treasury has other motives than keeping GM alive. They shouldn't be calling the shots.
      • 5 Years Ago
      I just wish GM and it's bondholders would take responsibility for themselves. After owning 2 Pontiac cars in the 80's I'd of NEVER bought stock in GM.

      To me it was plain as day. The Japanese and European car companies had the better cars and business models. They were charging a premium over GM and people were buying them.

      There seems to have been no foresight at GM in terms of products and quality.

      How could GM not be in the mess it's in? How could bond holders not see this coming? Did anyone have their heads in the sand?

      Is it the Union's fault or Management. It's management's in my opinion. I believe we could still have the highest paid and benefited union workers in every sector including auto workers. BUT management has to be CREATIVE and come out with some stellar products which warrant prices high enough to pay for worker's salaries and benefits. This is a REAL possibility and ALL industries need to think about this. There is more than enough to go around for all people. We just have to put our imaginations to work.

      Having said all this I do want GM to emerge as a leader in world automobile manufactures. But EVERYONE needs to realize we have to take responsibility for where we are.
        • 5 Years Ago
        I should add the following:
        (1) the UAW - enought said - which the JPY don't have to contend with
        (2) the Gov't of JPY funds R&D for the Japanese manufacturers
        (3) Pensions - which the JPY don't have to contend with


        It is amazing the GM went this far. But to wish them bankrupt (and the economic mess that follows) because your 1980's car sucked is stupid and so are you.
        • 5 Years Ago
        @ Emmet, great, those awards mean a lot. Why don't you tell that do a Saturn owner, tell that guy how good the Aura is and ask him if he will buy another Saturn or better yet another GM vehicle. You also speak of Malibu, prior to this generation, the old Malibu was an also run, just a few years ago Cadillac use to sell re badged Chevys ....still does by the way.

        Also, WHY IN THE WORLD would you buy something from a company that will die in 45 days? Regardless of quality and awards.
        • 5 Years Ago
        Idiot. The 1980's were several DECADES ago. You think GM quality has not improved in that time ?!?!? Keep you head up your a$$ then.
        • 5 Years Ago
        @ Sea Urchin

        thanks!
        • 5 Years Ago
        Coolio...name calling? OK.

        Having said that, why would anyone take a risk on buying a GM vehicle when you can buy a "import" from Ohio like Civic with a great track record. If you want to do so, great, please do. But please do admit that GM and Chrysler are dead.............and i am taking a guess that product had something to do with it.

        80's or not but Detroit still lags behind, just compare EXISTING vehicles, Cobalt is a joke compared to Sentra and whatever Kia offers....i do not even want to bring up Toyota and Honda.
        • 5 Years Ago
        One more thing...

        And GM has to get into the psyches of US car buyers. They have to be more sophisticated with their marketing. They can build stellar products all day long but if no one has a DESIRE to buy them then what good is it?

        GM's marketing has always played to the lowest common denominator in my opinion.

        Raise the bar and give American's more credit. We are a varied mix of people. Some sophisticated and others simply misunderstood.

        Give us some American sophistication we can all be proud of.

        Create identities for all of the GM brands. In my opinion there is no brand identity which can be seen in the styles of cars. Look at the cars which are desired by a lot of people. Audi, Mercedes, BMW, they all have a look which can be seen from their most inexpensive models all the way to the top of the line.

        GM can create this. But there has to be new leadership. There needs to be someone leading who isn't entrenched in the old thinking. We must look to the future and innovate.

        People think Steve Jobs should be in charge of GM. I don't think he should. What we need is someone who has his drive for perfection and innovation.
        emmetspad
        • 5 Years Ago
        @Sea Urchin. Went to Caddy web site and didn't see anything that looked like a Chevy. I went to Lexus and saw some Toyota look-a-likes, went to Acura and saw some Honda look-a-likes, and went to Infiniti and saw some Nissan look-a-likes. Big deal. How do you think car companies offer different products while keeping cost down. Some people prefer the looks of a Honda over an Acura. A lot of people I know have had both good and bad imports, same as domestics. I have had more good than bad with GM. They are machines and machines break, fail and need maintence. I own 2 GMs now that both have over 110 k miles on them and are still going strong. And I would buy another new GM.
        emmetspad
        • 5 Years Ago
        @Sea Urchin
        Let's compare recent GM vehicles. Malibu=North Amercian Car of the Year. Aura=North American Car of the Year. Silverado=North American Truck of the Year. Nissan=?
      • 5 Years Ago
      @ coolio

      Thanks so much for responding to my post. I never once mentioned bankruptcy. :)

      Happy Easter
      • 5 Years Ago
      I consider one of the biggest surprises out of this whole GM fiasco to be that a liberal Democratic congress is not supporting the UAW union to get MORE pay and benefits. I have never been a fan of the union, but what a big switch in the Democrat/union relationship over the past few years! Furthermore, if GM does go into bankruptcy, the retiree pensions and benefits could all go down the drain. Admittedly, I don't approve of that aspect. While these pensions and benefits may be a drag on GM's survival, the public should be able to rely on the government to insist that GM provide those benefits, even through chapter 11. At the very least, the government should guarantee them. The government should be representing retirees and under no circumstance seek forgiveness of those benefits or pensions.

      • 5 Years Ago
      Bondholders are calling Obama's bluff.

      Bondholders don' t think he will put them through bankruptcy because of political pressure from the public and the Unions.

      I think Obama blinks.
      • 5 Years Ago
      I hope I'm not the only one here hoping the GM bondholders get screwed. F' them.
        • 5 Years Ago
        I guess you believe managment and unions should tell them what Flounder got told in animal house " you F'd up Flounder....you trusted us". I like how everyone thinks the people who backed GM by lending them money should now get flushed down the toilet while the unions , one of the (many) causes of the failure should somehow get bailed out. So the retired teacher in the story above who lent money to GM who probably made 1/2 the salary of a GM worker (before atronomical benefits) now should somehow accept a near full wipeout so that the union can keep their benefits. Maybe in a bankruptcy they wont recover much but in any case they should be treated paris passu with all creditors especially keeping in mind that creditors are part of the solution, not the problem (and if you dont believe that try living without a mortgage, credit cards, and any other form of credit).
      • 5 Years Ago
      All of the larger bondholders also own credit default swaps on their debt (likely sold to them by AIG). There's no reason for them to grant any concessions whatsoever, because if GM goes under AIG makes them whole by helping themselves to the pockets of the US Government.
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