GM- Here's a thread I found on another board. GMInsidernews.com
>>GM has very little secured debt; about $6 Billion against the Saturn brand and plant. So the unsecured bond holders are then first in line for everything else after the government. And even the government being first may have to be defended in court; as they never actually secured the debt of the loan they gave to GM.
BTW, 99% of the current bond holders bought their bonds when they were trading at about 15 cents in the dollar. The biggest buyer and bond holder being Pimco, and they are using this to blackmail the government. See the likes of Pimco can easily write off any loss if the scaps of a liquidated GM don't make up the 15 cents loss. But they figure the government can't write off the millions of jobs lost from a liquidation, either politically or financially.
So the bond holders have the government by the short and curlies...<<
>>It's even simpler than that... all the bondholders ARE asking for are equal concessions from all parties involved. It's just that GM is more afraid of the UAW than they are of the bondholders. Bad call, GM.
If I were a GM bondholder, I would be holding onto those things for dear life. I deal with distressed companies from time to time, and RULE NUMBER ONE, is to keep your investment as high on the bankruptcy totem pole as you can. Doing a debt-common stock swap is suicide, for all intents and purposes.
Moreover, there is absolutely no incentive whatsoever for a GM bondholder to do this swap. MonaroSS is 100% spot-on with his analysis... most GM bondholders bought in at 15 cents or so on the dollar.
Holding onto your bonds means one of two things:
1) Let the GM mothership go down in flames, then collect 40-50 cents in bankruptcy
2) Wait for GM to recover, and collect 100 cents.
Doing the equity swap means one of two things.
1) Let the GM mothership go down in flames, and have a pile of worthless GM common stock.
2) Wait for GM to recover, and make a couple of percentage points on just-about-worthless GM common stock, being as it will be diluted into oblivion anyway.
GM - And this. (Cy, I am getting intrigued by the GM senior unsecured trading here at 8 cents on the dollar.)
>>And why wouldn’t they? As attractive as 30 cents on the dollar for equity in a firm that has five frantic days to produce a viability plan is, there seems to be some . . . hesitation. The Detroit News reports that GM is trying to finagle a $9.2b debt for equity swap with the holders of its unsecured debt to fulfill the requirements for federal loans. According to the usual anonymous sources, bondholders are holding out for 50 cents on the dollar. They say the figure mirrors the value of concessions being negotiated with the United Auto Workers. (Sound familiar?) Luckily bondholders seem to have an ingenious solution for the UAW-bondholder deadlock: the government could just lend GM more money. This is some seriously high-stakes poker.
Technically, a failure to extract concessions would trigger a recall of the government loan, forcing GM into bankruptcy. In this scenario, unsecured debt holders would receive nothing. But bondholders argue that the UAW is only conceding 50 percent of its pension obligations, while they are being asked to erase 70 percent of their debt.<<
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