GM bondholders reject offer

GM bondholders reject offer

money.cnn.com

NEW YORK (CNNMoney.com) -- General Motors has fallen far short of the bondholder support it needed for its proposed debt-for-stock offer, according to a source familiar with the matter, virtually guaranteeing that the nation's largest automaker will be forced to file for bankruptcy court protection within the week.

The bondholders own $27 billion in corporate notes. GM (GM, Fortune 500) needed owners of 90% of those bonds to accept stock in return for the debt in order to reduce its interest expenses to a more manageable level.

GM made the offer to bondholders on April 27. The company o

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Oh, great. Not even people invested in GM think it's worth anything.

I know that this could simply be a stall tactic to try to get a better offer, but if you read the article -- GM isn't even CLOSE to getting the number they need to move forward. Further, I'm sure they'll come to some kind of agreement if, as the article says, filing bankruptcy would yield them even less of a return.

All I can say is this:

Another sound investment for the hard-working Americans' money!

money.cnn.com
(visit the link for the full news article)

reply to post by lpowell0627


If I had prefered bonds then I certainly would not trade them for shares as even if the company goes bankrupt Prefered bonds get first dibs on funds. Of course Obama and his judge shafted the Chrysler bond holders so maybe it would be better to just dump them.

Think of it this way, if you trade common bonds for shares you get a worthless piece of paper saying you have shares in a bankrupt company, you'll never get anything for them and you would be prevented from selling them while it is in bankruptcy protection. If it (GM) craters prior to you selling them then you get nothing and are out all your money. Or you can let the company crash and get a small % of your original investment back.

Do you take a risk or play it safe? Right now I wouldn't touch auto shares or bonds.

Bondholders are idiots! First by investing in the company in the first place and second by not taking this deal. They would get much much less in a bankruptcy proceeding than in the case that GM comes out of bankruptcy and becomes profitable.

The bankruptcy is going to be manage by the government who right now has no love for greedy Wall St investors or fund managers. If this investors really really thought that bankruptcy would be a better option they would have push GM themselves into bankruptcy a long time ago, they are bluffing and they would get caught on their bluff.

reply to post by Bunch


The bondholders are getting slapped in the face anyways..

Common Shareholders are even getting 1% supposedly.. thats the real BS, they shouldnt get anything (sorry to say)

reply to post by GreenBicMan


But no one force them to invest in GM anyways. Now they are crying for their poor decision making and want the government to make them hole on their poor investment decision...

Well they could go to the back of the line in that case since its already way too long...

Capitalism means that when you make good decision you get rewarded when you make poor decisions you get nothing...I know is a hard concept to graps amid all the bailout fever that is running wild not only on this country but around the world.

[edit on 26-5-2009 by Bunch]

reply to post by Bunch


Bondholders deserve something in a bankruptcy

Why would you think any different?

They financed the debt of the company

Did I hear someone say bondholders should go to the back of the line in a bankruptcy? They must be part of the Obama administration.

In that case why would anyone loan a company money at anything less than usurious rates like 30%+?

God forbid the "evil, greedy, bondholders" would like to see the thing settled in a BK in the way they understood it would be by hundreds of years of contract law when they decided to lend GM money by buying GM bonds.

Seems like I heard that something like 20% of GM's bonds were held by individual investors. For reference nearly all of Chrylsers debt was held by institutions.

reply to post by GreenBicMan


The bondholders that the article refers to are unsecured bondholders, which by investing terms mean that they did not aks for collateral for their invesment, meaning that they would go to the back of the line, thats why is so idiotic for them not to take this deal.

Unsecured bondholders would get if anything pennies on their investments but if they swap they might get more than that, at this point is a bet that they should take IMO

[edit on 26-5-2009 by Bunch]

reply to post by Bunch


You mean like the UAW who had unsecured instruments and will end up owning something like 20% of the company? From my understanding of the situation the UAW had the unsecured portion and the bonds in question would unsubordinated not unsecured big difference.

reply to post by jefwane


Thats why this decision should be an easy one for the unsecured bondholders, if the UAW agree to swap, they are basically signaling that the end might be near and they are going to be more proactive in GM new era, then these bondholders should follow suit, to me its a no brainer.

NEW YORK (AP) — In the end, General Motors' massive cash needs likely trumped any chance of the automaker avoiding a bankruptcy court-supervised reorganization.

General Motors Corp. is expected to announce early Wednesday that only a small fraction of the holders of its $27 billion in bonds agreed to swap that unsecured debt for a 10 percent equity share of a recapitalized GM.

Reaching such an agreement was one of the requirements of the Obama administration, which already has committed $19.4 billion in aid and said it would only provide more funds if bondholders and unionized workers made concessions that substantially reduced GM's costs.

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[edit on 26-5-2009 by Bunch]