GM bond holders reject Obama offer
General Motors has fallen far short of the support it needed to win from bondholders 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.If the rule of law is to prevail, unless the bondholders signed a valid subordination agreement with the unions and the government, then the bondholders should be the priority creditors in a bankruptcy and have the right to a significantly bigger piece of the company than Obama is offering them. I have seen nothing to indicate these these bondholders signed any subordination agreement. What Obama is attempting to force them to do is in effect sign a subordination agreement or get nothing. That is in effect extortion.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 expenses tied to interest payments to a more manageable level.
GM made the offer to bondholders on April 27. It owes $1 billion in interest payments to the bondholders on June 1, money GM says it does not have.
The company also faces a June 1 deadline to win concessions from its union, creditors and other parties or be forced into bankruptcy by the U.S. Treasury Department, which is funding GM's operations through direct federal help.
The bond offer deadline is set to expire Tuesday night, with only a small percentage of bondholders have taken up the company on the offer, according to the source. An official announcement on the offer is due early Wednesday.
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People should be much more upset about this deal. It appears corrupt on its face.
Well, Merv, its clear that thousands of families have taken a big financial hit on this one. My 81 year old Mother is one. She lost half of her life savings, not to mention a sizable portion of the finances she had for her continuing nursing care. For a "people president" to do such a thing, a thing that many are convinced was not only a hideous betrayal of "the people" but also a unconstitutional, unlawful, act of pure corporate pampering. Its simply amazing that a deal to not only save the interest owed the GM bondholders, but their principal, which is not a rocket science endeavor, was completely reasonable and possible and ignored. What an amazing fact he has created as well. That being: No, your bond insurance is not going to save you if the president or "government" decides to deny you. Forget feeling like you've invested wisely, conservatively, and in so-called safety. Feel this way: Obama, or government, may, and possibly will, use this precedent to rob billions from the people again. and again, etc. Obama, and any others, can now stand behind their podiums, stick a big grin on their face, look all authoritative, bold, and super-confident, and even all-powerful, and offer the "Trust Me" line "your money is SAFE! Invest! Get America going again!" and be happy to know that many millions of Americans, and other investors around the world, are thinking.. B*LLsH*T!
ReplyDeleteBy the way, does he even care?.. i sure didn't hear anything that even remotely resembled a apology to those who lost nearly all their money. And certainly no reasonable "cure" by way of a sensible protracted (long term) payback of principal and interest. As Mother said, "I could have been ok if he just denied me the interest I was due, but he even reached in and took my principal, my life savings...it feels just like crook reached into my purse and snatched all my money for my groceries and home bills, because thats exactly what has happened." People President my butt.