REPORT: GM bondholders give go-ahead to revamped deal, bankruptcy still expected
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 the company in exchange for their paper. A major group of bondholders with 20% 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 in the company instead. The relief to the balance sheet also helped sway the bondholders. In the interim, the UAW will get a 17.5% 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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Reader Comments (Page 1 of 2)
misterdbarton 2:13PM (5/28/2009)
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.
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EVan 2:27PM (5/28/2009)
@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.
DKB_SATX 3:02PM (5/28/2009)
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.
Christian de Saint Preux 2:20PM (5/28/2009)
I fear for Corvette... and the racing team... Wow...
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wisefool860 2:26PM (5/28/2009)
It's official, I will never buy a GM product.
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Shamdiddly 2:30PM (5/28/2009)
Thanks for sharing. On a related note I will never sleep with your mom. (again)
Shamdiddly 2:33PM (5/28/2009)
I imagine you never would have to begin with.
wisefool860 2:47PM (5/28/2009)
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.
Shamdiddly 2:52PM (5/28/2009)
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.
wisefool860 2:58PM (5/28/2009)
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.
Shamdiddly 3:14PM (5/28/2009)
LOL again, maybe you should reposition your views of your "opponents". I'm off to hump an urn now, ta ta!
Cougs 3:16PM (5/28/2009)
@ Shamdiddly
The real FAIL here is that GM is putting out some of the best cars around and they still can't turn a profit. It has nothing to do with sales, it has to with costs. I'm with wisefool860 in that the fact that it is the general lack of understanding of sustainable cost structure between the UAW and the GM leadership that has put them in this position, and now we are being robbed to pay for something that the Federal Government has no legal ability to be involved with. Taking pot-shots at someone without stating an opinion is just trolling.
Shamdiddly 4:01PM (5/28/2009)
@ 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.
The Other Bob 4:12PM (5/28/2009)
"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.
wisefool860 7:11PM (5/28/2009)
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.
Randy 3:00PM (5/29/2009)
@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!
EVan 2:34PM (5/28/2009)
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.
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Jonathon Ramsey 2:51PM (5/28/2009)
Corrected. Thanks.
Kris Burbidge 2:36PM (5/28/2009)
I can't see the Volt succeeding at any price over $29,000.
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BoxerFanatic 2:38PM (5/28/2009)
"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.
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