I’ll also note that the GM bondholders seem to have learned something from the pathetic and idiotic performance of the non-Tarp bondholders in the Chrysler bankruptcy. Rather than run around squealing like a stuck pig yelling that the administration played hardball with them, whimpering on anyone’s shoulder who would listen, the GM bondholders apparently have a two-pronged strategy. First, use Fred Hiatt to issue vague threats:
The administration argues that it could not risk alienating the union for fear of triggering a walkout that could permanently cripple GM. It also posits that it had to agree to protect suppliers and fund warranties in order to preserve jobs and reassure prospective buyers that their cars would be serviced. These are legitimate concerns. But it’s too bad that the Obama administration has not thought more deeply about how its bullying of bondholders could convince future investors that the last thing they want to do is put money into any company that the government has — or could — become involved in.
Second, personalize the bondholder:
I am an American retiree. Like many small investors, I am relying on “safe” investments such as bonds backed by America’s largest companies to fund my retirement. One of these companies is General Motors.
First, let’s set the record straight about who owns GM’s bonds. We are hardworking families, individual investors and retirees who purchased billions of these bonds in $25, $50 and $100 increments. Many bonds were bought directly and others are held in our pension funds, 401(k) plans and other retirement programs.
I purchased GM bonds in 2005 and own $91,000 worth. These bonds account for a very sizeable portion of my retirement income, and so it is absolutely devastating to watch GM’s problems bring the once venerable company to the brink of failure. My standard of living is truly in jeopardy.
So far, I think we can all agree that this is a better effort than having a well-heeled lawyer in a several thousand dollar suit whining about being bullied. Meanwhile, in Detroit:
Bondholders at General Motors on Wednesday rejected an offer to exchange $27 billion in debt for a small amount of stock, as G.M. prepared for a bankruptcy filing that could come as soon as this weekend.
In Europe, the company moved to combine its main operations under the umbrella of Adam Opel, its German business, to simplify the sale of the unit.
In a statement about the bondholders, G.M. did not give vote totals for the tender offer, which began on April 27 and expired at 12:01 a.m. Wednesday. G.M. had required 90 percent of bondholders to agree to exchange their debt, said said Wednesday morning that the notes tendered were “substantially less than the amount required.”
Without approval, G.M. had said it would seek bankruptcy protection. But it made no announcement of its plans. The company said it had withdrawn its offer, and that its board would meet to decide further steps.
I have no idea where bondholders think that $27 billion is going to come from. From what I understand, GM has nowhere near that in assets, they are just bleeding out and would have been dead months ago but for government intervention, and there are people acting like there is money to be had. I simply do not understand the mindset. It just seems pretty clear to me that GM bonds were a bad buy, and if you owned them you are screwed. I know that sucks and it will be traumatic for lots of people, and maybe I am just completely wrong about this, but I don’t understand where the money is supposed to come from. Selling off aging factories in Detroit with long environmental tails? How much would those fetch in today’s market? Am I missing something here? I’m not trying to be sarcastic, I just don’t understand where people think the money is going to come from and where there is any value left in GM.