• May 28, 2009
Yesterday, General Motors and its bondholders had officially called it quits, and GM was headed for a certain and certain-to-be-rocky bankruptcy. Today, according to a company filing, The General and the necessary chunk of its bondholders have come to an agreement, and the company looks to be headed to a slightly less rocky bankruptcy.

CNN explains that GM's bondholders with $27 billion in GM debt had been offered 10 of that debt, roughly $5.5 billion, is said to have preliminarily approved the deal. One of the sweeteners that finally got them to swallow the medicine was offering all bondholders the chance to buy another 15% of the new, post-bankruptcy company "at a low price."

The other: GM won't have to repay any of the government loans it has received or that it will receive in bankruptcy, with the government taking a 72.5 stake, with the bondholders getting the rest. The bondholders had to agree not to fight the bankruptcy in court. Bondholders have until Saturday afternoon to officially declare their acceptance of the deal.

It has been presented up to now that the lack of a bondholder agreement is what kept GM headed toward bankruptcy. Yet even though GM supposedly has an agreement, it is still widely expected to declare bankruptcy next week. The company needs to shed its anchors and barnacles quickly – and it appears it will still take a BK will do that.

[Source: CNN]


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  • 33 Comments
      • 5 Years Ago
      It is kinda funny in some ways - the tax money was used to pay for GM to stay afloat, and yet I didn't get one free Cadillac out of this; in fact, i have to pay and additional 30k to get one from a company I now partially own.
      • 5 Years Ago
      A clarification of the blog post...

      The 10% offer was not to the "Major bond holders" in this situation but to the entire group of unsecured bond holders holding not just 5.5 billion but 27 billion dollars worth of debt.

      The 5.5 billion number comes from the fact that GM is dealing specifically with a group of bondholders that holds about 20% of the unsecured debt in order to fast-track the bankruptcy process.
        • 5 Years Ago
        Corrected. Thanks.
      • 5 Years Ago
      I fear for Corvette... and the racing team... Wow...
      • 5 Years Ago
      Hey, the next Legacy is going to still be built in Indiana...so there you go.

      I will stick with my Maxima (made in the land of Jack Daniels). Or maybe a Lincoln MKS (though I can't bring myself to buy anything that is made by the UAW simply out of spite at the moment).
        • 5 Years Ago
        The new legacy looks pretty good. Made in the same plant as Toyotas. Also not union made. I wonder, how many non unionized companies are looking for bankruptcy or corporate bailouts this year? Hmm.
        • 5 Years Ago
        I own a Legacy...

        The new one is a FAIL as a good value modest sport sedan. The power department is still good, but the body, and the interior/feature set are a big step backwards. GT being manual only almost guarantees it won't be adopted mainstream, while the bodywork and de-contenting means that the enthusiasts who liked the current Legacy are less than impressed...

        They are making it into an AWD Camry, that looks like an Accord, and various other copied cues.

        At least it isn't going to built by the government...

        At this point, I think it is used cars for me. If they aren't all crushed by "Cash for Clunkers."
      • 5 Years Ago
      Ford is reaping the positive publicity since they didn't ask the government for a loanbailout. I guess many former GMChrysler customers will be buying Fords instead.
      • 5 Years Ago
      wisefool I think you know that answer, none! These comments at least give me a little hope that some people see what is happening with our government.....to bad most are blinded by a smooth talker.
      • 5 Years Ago
      So typos...ugh.

      Anyway, GM needs this hybrid partnership with Toyota to 1. be true, and 2. happen fast. The Volt is going to fail, everyone knows that, even GM does, but they've invested too much into the program to quit at this point.
        • 5 Years Ago
        @misterdbarton....

        Feel free to read the comments from the posting about the Toyota to GM hybrid offer. Most everyone agrees that this is a dumb move.
        • 5 Years Ago
        Off-topic. Obviously you aren't pre-ordering a Volt, but I do think it's a bit early to declare its failure before even a preproduction model has been reviewed. Since you seem to think Toyota is the perfect automotive business, go buy one.
      • 5 Years Ago
      It's official, I will never buy a GM product.
        • 5 Years Ago
        @ cougs,
        spouting lethargic battlecries such as "It's official, I will never buy a GM product." without backing oneself up is all I was taking shots at. :P

        I tire of the hatred of people taking potshots at GM and making comment as the above when the person never intended on buying a GM in the first place.

        My LOL at his ignorance is because he believes somehow Ford is above taking government money. Looking back, Ford was wise enough to mortgage everything including the trademark to borrow the money they needed before the banking system tanked. Also, many people do not realize how much of Ford is still owned by a very proud family that would let the company die before they would allow the government to tell them what to do.

        If one cannot fathom why GM tried to stay out of bankruptcy by taking government loans, I consider it my personal quest to make fun of their mom. Don't hate the player, hate the game, Baby.
        • 5 Years Ago
        Ignorance. You have not provided a single fact (or semblance of fact) to make an argument or concurrence. Often, liberal fascists when confronted with facts, scoff at others and call them ignorant. You have provided me with the highest form of affirmation.
        I win.
        • 5 Years Ago
        My mom is dead, thanks though she would have been pleased.
        I would not buy a GM product on principle. I do believe it is an absolute shame that the U.S. is making some of the best cars in the world and certainly the best cars they have made in the last 15 years. The reason I would not buy a GM product is not because of quality, style, or function, but because they have allowed themselves to be bought by the government. They have failed, not because of filing chap. 11, but that they took taxpayer money, allowed unions to put themselves in this position, and are crying because bondholders are actually expecting to get back the money they have lent them. A corporate bond is nothing more than a loan. If you borrow money from somebody, they expect you to pay it back, not have the government sweep in and say: "Oh he doesn't have to pay you back, hard times are on everyone." Those bondholders represent main street investors, you know, grandmothers on retirements, parents trying to put their kids through school. Instead of at least getting their money back, they are being told they will get 10 cents on the dollar for their investment because Obama said so, even if IT IS AGAINST THE LAW. I own a Ford, people who said no thanks to corporate welfare. People who lived within their means (including working with unions.) Chrysler and GM get what they deserve.
        • 5 Years Ago
        "Instead of at least getting their money back, they are being told they will get 10 cents on the dollar for their investment because Obama said so, even if IT IS AGAINST THE LAW. "

        It's not against the law, its called a negotiation and its called bankruptcy, which is regulated under the LAW.

        Let me break it to you. Investing has risks. People who invested in GM took a risk, some of them took huge risks and some of them lost. I love how all the Wall Street types make the case that GM is screwing Grandmothers. Hardly, they are screwing many fo the same people who caused the banking meltdown which triggered this mess.

        If a retiree put all of their money into GM then they didn't diversify, which means they are stupid. I am losing money on GM stock too, but it is part of a portfolio that reduced the risk.
        • 5 Years Ago
        I know about your mom; necrophilia was merely a phase I went through.

        LOL at your ignorance, but thank you for buying an American car.
        • 5 Years Ago
        Thanks for sharing. On a related note I will never sleep with your mom. (again)
        • 5 Years Ago
        I imagine you never would have to begin with.
        • 5 Years Ago
        LOL again, maybe you should reposition your views of your "opponents". I'm off to hump an urn now, ta ta!
        • 5 Years Ago
        @Shamdiddly

        The ream SHAMe here is that the original poster made a valid post and Shamdiddly was pretty much a complete a-hole. THEN more a-holes piled on and voted Shamdiddly up!

        What a miserable failure on multiple levels!
        • 5 Years Ago
        And the law requires that bondholders be PAID FIRST under bankruptcy. A bond is a loan, similar to a certificate of deposit you purchase at a bank. You give money to the company, they agree to an interest rate and pay you back at a certain time to return a certain amount. This is different from stocks which is partial ownership and represents more risk than a bond. According to the law, not a single dime should be distributed to anyone else during bankruptcy until the bondholders have settled.
      • 5 Years Ago
      Oh my god! Fascists, Communists, what are we to do? The sky is falling.

      Get a grip people.

      Governments all over the world invest in their buisnesses, this doesn't mean anyone's freedom is at risk. Get a life you freaks.

        • 5 Years Ago
        No one's freedom is at risk?
        Was Bob Lutz and Peter Nardelli free to keep their jobs? Was it the board of these companies that asked them to step down? Nardelli should have been fired sure, but that was a decision for stockholders, not the government. As for Lutz, in recent years he has produced the Pontiac G8, the CTS(-V), Cobalt SS, and soon we will see the new Cadillac SRX and Chevy Cruze, all of which are going to catapult GM into a much better situation. So why fire him now after the hard work is already done?
        Did we provide bailout money to buy time so that the unions could regroup, posture, and put themselves into a situation where post chapter 11 they weren't getting screwed? I think so. Everyone saw this months ago. Magazines were calling this bankruptcy last summer, however, if it had gone down then, the unions would not have had a fascist for a president in power, and so we bailed them out.
        • 5 Years Ago
        Considering you call yourself "BoxerFanatic" and the involvement the German Government has in Porsche, I would have to call out your hypocracy.
      • 5 Years Ago
      "GM won't have to repay any of the government loans it has received or that it will receive in bankruptcy, with the government taking a 72.5% stake in the company instead."


      WHAT DID WE SAY....

      When everyone was talking about this being a "loan", and people who knew, KNEW, where this was headed, said don't spend tax dollars down this road....


      There is no way on God's green Earth that I will willingly spend my hard earned dollars that are worth less and less every day, to buy a product built by my own socialist government that I did not sanction, when they have seized my earnings to do it.

      They are getting from me what I cannot keep, because if I refuse to pay my taxes, I go to jail at the point of a gun. NO MORE. NO FURTHER. Not another red damn cent of my diluted buying power.
        • 5 Years Ago
        Isn't it fantastic? We all own a stake in a company in which we have no say and will watch our "proxies" ruin it right before our very eyes.

        I have a question, since we all have a stake in GM now, does the general public rate at least a supplier discount on a new GM vehicle?
        • 5 Years Ago
        The UAW isn't getting "elected to the board". It's a trust fund who's only job is to ensure the trust fund remain healthy, and was forced upon the UAW when GM couldn't cough up the cash to fund the VEBA that was supposed to relieve the Big Three of their health care plans.

        This is, in no small part, a huge coup for General Motors and a huge blow to the United Auto Workers, who are planning on selling the stock as soon as possible to PRIVATE investors so the retirees who are sick and indigent from working in a hazardous environment all their lives can see a doctor.
        • 5 Years Ago
        I knew there wasn't a chance in hell we'd ever see our loans repaid, which was why it was idiotic that every other poster on Autoblog compared it to the money that banks got-the banks actually want to, and will be able to pay the loans back so they're actual loans. The money given to GM was never going to be a loan by a longshot since you can't repay huge loans if you aren't going to be making money-even if the new GM was profitable it would have a hard time paying just the interest on the loans let alone the principle.

        They should have just gone into bankruptcy earlier, since the end result is going to be the same thing, except it's cost us a lot more money to delay it this long. I get that it would have been a disaster for it to have filed in November, but this whole thing has just dragged on too long and taken too much money when all our money did was buy GM a few extra months (at an obscene price).

        That said since what's done is done, I don't think we should hold it against GM-if they make a competitive product I think it should be considered like any other vehicle. And really you might as well buy from a company you involuntarily now own.
      • 5 Years Ago
      I have always been a G.M. person. I've purchased Chevrolets since 1955, but have recently purchased my first Ford Vehicle. I bought Ford because they didn't accept the handout from the government. I'm not saying I'll never buy another GM product but I will always put Ford First over all Of them
      • 5 Years Ago
      This is getting more and more absurd. How can anyone expect that the debt markets will ever recover when your legal rights as a bondholder can be trampled on by a government bureaucrat whenever the company screws up? Most bondholders legally have first rights to company assets in a bankruptcy, but now the government can come in and turn that on its head. The UAW doesn't even rate as a secured creditor, yet they are getting nearly twice the ownership as bondholders and the feds get 72%. Negotiating witht he feds seems to be akin to negotiating with Tony Soprano, you just smile and say "yes, my capo di capos"

      Excellent op-ed form IBD today on this. They talk about how paying British bondholders right before the War of 1812 cemented with Europeans that our word was our bond and helped facilitate the financing of the industrial revolution in the US. Now we're reneging on one more of the fundamental aspects of our capitalist system. Let's see where that gets up when Obama needs to sell trillions more in treasury bonds to finance his Five Year Plan.

      http://www.ibdeditorials.com/IBDArticles.aspx?id=328317766151198
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