Yeah that GM bailout sure is turning out badly

[vy65]

General Motors, too, had issued secured debt during its years of financial turmoil, but these bonds made up a far smaller fraction of the company's total outstanding debt. And in striking contrast with the Chrysler case, General Motors's bankruptcy plan left the secured creditors intact, paying them the full value of their claims. From the perspective of bankruptcy law and contract rights, this development was encouraging: The Obama administration did not seek to plunder GM's secured creditors as it had Chrysler's. From the perspective of the rule of law, however, this differential treatment might have been even more troubling.

http://www.nationalaffairs.com/publications/detail/the-auto-bailout-and-the-rule-of-law

Authored by: Todd Zywicki is the George Mason University Foundation Professor at the George Mason University School of Law and a senior scholar at the Mercatus Center.

lol

[vy65]

For every "op-ed" piece you can find claiming the bonds might be unsecured there were 10 news articles saying they were in fact secured creditors.

I'm not going to beat this dead horse again.

So you haven't read the trust documents.

That's very ignorant and painfully stupid of you.

[vy65]

oh and lol news articles.

[vy65]

GM presented somewhat different issues because the only secured creditors were the U.S. and Canadian governments, which ran the transaction. Even the U.S. government cannot shortchange itself, and here it did not look as though anything could ever be left over for unsecured creditors. But even so, there is no explanation as to why this deal favored the UAW unsecured creditors over the unsecured bondholders. The bottom line was another brand of UAW favoritism.

Richard Epstein, James Parker Hall Professor of Law, University of Chicago

http://www.thefreemanonline.org/featured/political-bankruptcies-how-chrysler-and-gm-have-changed-the-rules-of-the-game/

[vy65]

Treasury's efforts to recoup a possible judgment against the banks could block ex-GM bondholders and other unsecured creditors from seeing a windfall from the lawsuit and could even dilute the recovery they've already received from GM's Chapter 11 case, the creditors said in papers filed Tuesday with the U.S. Bankruptcy Court in Manhattan.

lol news article.

[RandomGuy]

In this case the UAW (unsecured creditors) were jumped ahead of the bondholders (secured creditors)...mainly for political purposes...it was pretty unprecedented...Yeah, the bondholders got a sliver of the new deal but NOTHING like they would have gotten in a normal bankruptcy.

Bondholders are generally not secured creditors.

Do you have some supporting evidence showing in this instance they were?

(they might have been, I don't know, but don't think they were)

(edit)

The author of the paper referenced by Vy, Todd Zywicki, seems to be pretty familiar with the whole affair.

I think Mr. Zywicki's analysis of the legality of the whole process is also pretty much spot on.

[RandomGuy]

http://www.bloomberg.com/news/2011-04-06/old-gm-bondholders-getting-shares-in-new-general-motors-may-depress-price.html

Investors holding bonds in the old General Motors Corp. will receive stock and warrants for shares in the new General Motors Co. (GM) on April 21, an action that analysts said may depress the stock price.

Old GM, now known as Motors Liquidation Co. (MTLQQ), will give bondholders 150 million shares in GM and warrants to buy 272.8 million more shares. A trust holding the shares will distribute them directly to bondholders’ brokerage accounts on or after April 21, according to a memo distributed Wilmington Trust Inc., a money-management firm hired by the creditors’ committee.

Some of the bondholders are retail investors who may sell the shares and briefly sink GM’s stock price, said David Whiston, an analyst with Chicago-based Morningstar Inc. Investors have probably priced in the dilution, so it won’t change GM’s long-term value, he said. He has not changed his $48 a share valuation based on the release of shares to bondholders.

“I would think that there will be more selling than holding,” Whiston said. “Any sell-off in GM is a buying opportunity. Long term, I think the company is positioned very well.”

Bondholders were promised stock and warrants in the new GM to make up for some of their loss during the predecessor company’s government-backed bankruptcy. The warrants given to bondholders for new GM stock are already in the money, according to a report by Kirk Ludtke, senior vice president of CRT Capital Group, a money management firm in Stamford, Connecticut.

[RandomGuy]

I would note that institutions that normally hold bonds do so because they are less risky than stocks.

Giving them stocks in return for their bonds would mean that generally means that they would be required by their own investment plans to sell the stocks.

My gut says that this is probably keeping the price of the stock lower than it should be, since this creates a pretty powerful "sell" incentive, relative to demand.

[vy65]

http://www.bloomberg.com/news/2011-04-06/old-gm-bondholders-getting-shares-in-new-general-motors-may-depress-price.html

Investors holding bonds in the old General Motors Corp. will receive stock and warrants for shares in the new General Motors Co. (GM) on April 21, an action that analysts said may depress the stock price.

Old GM, now known as Motors Liquidation Co. (MTLQQ), will give bondholders 150 million shares in GM and warrants to buy 272.8 million more shares. A trust holding the shares will distribute them directly to bondholders’ brokerage accounts on or after April 21, according to a memo distributed Wilmington Trust Inc., a money-management firm hired by the creditors’ committee.

Some of the bondholders are retail investors who may sell the shares and briefly sink GM’s stock price, said David Whiston, an analyst with Chicago-based Morningstar Inc. Investors have probably priced in the dilution, so it won’t change GM’s long-term value, he said. He has not changed his $48 a share valuation based on the release of shares to bondholders.

“I would think that there will be more selling than holding,” Whiston said. “Any sell-off in GM is a buying opportunity. Long term, I think the company is positioned very well.”

Bondholders were promised stock and warrants in the new GM to make up for some of their loss during the predecessor company’s government-backed bankruptcy. The warrants given to bondholders for new GM stock are already in the money, according to a report by Kirk Ludtke, senior vice president of CRT Capital Group, a money management firm in Stamford, Connecticut.


Distributions to General Unsecured Claimants

Wilmington Trust Company has been selected as the Trust Administrator and Trustee for the Motors Liquidation Company GUC Trust that has and will make distributions to holders of Allowed Class 3 General Unsecured Claims under the Second Amended Joint Chapter 11 Plan of Motors Liquidation Company et al and will continue to make distributions to holders of GUC Trust Units. These distributions consist of common stock of General Motors Company, warrants to purchase General Motors Company common stock, and cash. To see the Bondholder Distribution Allocation by Indenture please click here.

Should have went here first as its straight from the horse's mouth. Thanks for the link.

GM bondholders were not secured. They were not "crushed" in favor of the UAW. In fact, they were compensated as a part of the bankruptcy plan (albeit in stock as opposed to straight cash, and as usual, for pennies on the dollar). And also of note is the fact that the secured creditors received a complete payout on all secured claims. To the extent that any bondholder was "secured" (which is not the case), they would have gotten 100 pennies on the dollar - I wouldn't call that "crushed."

It'd be one thing if 1) they were secured and 2) didn't receive full/any payment as a part of the plan. But that's clearly not the case.

[Winehole23]

I noticed that. You are not only ignorant you are too painfully stupid to even realize it.Reconsider? Your take just got crushed.

[RandomGuy]

Same link.

Interesting bit and well noted.


As far as I can make out, the main legitimate complaint of the GM bondholders is that they’re getting paid out less than other unsecured creditors (specifically the UAW) with whom they’re pari passu. But I don’t think there’s a legal right anywhere for all pari passu creditors to receive exactly the same treatment. If you owe money on four different credit cards, there’s no law saying you have to pay them all the same proportion of the total amount outstanding.

I would note that UAW, as creditors have a much longer time horizon for the company than your average bondholder, whose interest terminates with the maturation of the bond.

The UAW, as employees, are part and parcel of the ongoing entity itself.

Political conspiracy theories aside, I imagine they would have more bargaining power than other unsecured creditors in such proceedings, simply because without their ultimate support, there would be no company, as unlikely as they might be to walk away or strike.

That does not strike me as unfair or unethical, were they to get a bit more proportionally than the bondholders, for the simple reason noted above.

That said, union-bashing fits with the Conservative Outrage Machine narrative. The Machine does not care about such things.

[ChumpDumper]

Also note the bondholders voted on the deal that put them behind the UAW in compensation.

I'll go ahead and deal with CC's inevitable class warfare rant about the small bondholders who had less of a say what happened to their entire life savings that they put into GM bonds:

Why the hell would anyone put their entire life savings into GM bonds?

[RandomGuy]

In CC's defense, bondholders in the Chysler reorg did get fucked. He might have been thinking about that.

Again, the read that vy posted was very detailed and thorough.

[Sportcamper]

It just keeps getting better and better.....:rolleyes

Attention U.S. taxpayers: You now own a piece of a French car company that is drowning in red ink.

That's right. In a move little noticed outside of the business pages, General Motors last week bought more than $400 million in shares of PSA Peugeot Citroen - a 7 percent stake in the company...Because U.S. taxpayers still own roughly one-quarter of GM, they now own a piece of Peugeot...

http://news.yahoo.com/american-auto-bailout-france-100824412--abc-news.html

[xrayzebra]

Yeah, sport, saw that this morning. Guess their union over there will be joining ours
over here or vice versa. Wonder when we will bail out their health and pension
fund?

[GSH]

In CC's defense, bondholders in the Chysler reorg did get fucked. He might have been thinking about that.

Again, the read that vy posted was very detailed and thorough.


Yes, he's talking about Chrysler, and yes the secured creditors did get screwed, and the UAW got rich. GM is a different cluster-fuck. No small part of which was putting the government in charge of production, and letting them pour taxpayer money into a piece of shit product, to further a political agenda.

[Yonivore]

Related:

Fisker Karma car dies in Consumer Reports testing (http://www.autonews.com/apps/pbcs.dll/article?AID=/20120308/OEM05/120309861/1492)

Whatever Midas had; well, Obama has the opposite.


DETROIT (Reuters) -- A $100,000-plus Fisker Automotive luxury car died during Consumer Reports speed testing for reasons that are still unknown, leaving the struggling electric car startup with another blow to its image.

"It is a little disconcerting that you pay that amount of money for a car and it lasts basically 180 miles before going wrong," David Champion, senior director for the magazine's automotive test center, told Reuters.

...

The breakdown of the Consumer Reports car is more bad news for a company that already recalled some Karmas. Fisker also has changed its CEO and halted production over the past month as it seeks to renegotiate the terms of a $529 million loan from the U.S. Department of Energy.

[RandomGuy]

Related:

Fisker Karma car dies in Consumer Reports testing (http://www.autonews.com/apps/pbcs.dll/article?AID=/20120308/OEM05/120309861/1492)

Whatever Midas had; well, Obama has the opposite.

How exactly is that related to GM? Probably should get its own thread.

[RandomGuy]

Whoops.

Here is the relation.


Fisker saves a tremendous amount of development costs by using pre-engineered components developed by other car companies whenever possible, as long as it does not compromise the integrity of its vehicles or the customer experience. For example, the door handle mechanism is actually a General Motors part , Fisker Automotive just pays a fee to GM for each door handle in the Karma, which its much cheaper than designing its own door handles.

:p:

[RandomGuy]

Yes, he's talking about Chrysler, and yes the secured creditors did get screwed, and the UAW got rich. GM is a different cluster-fuck. No small part of which was putting the government in charge of production, and letting them pour taxpayer money into a piece of shit product, to further a political agenda.

Government wasn't in charge of production that I am aware of. Source? (probably already been addressed in the thread, I would guess)

The UAW also took some pretty substantial hits in all of this. I don't see how they "got rich". Would you like some source material on the cuts they took to their pensions?

I don't see how losing money makes one "get rich".

[Winehole23]

got rich keeping their jobs?

[RandomGuy]

Related:

Fisker Karma car dies in Consumer Reports testing (http://www.autonews.com/apps/pbcs.dll/article?AID=/20120308/OEM05/120309861/1492)

Whatever Midas had; well, Obama has the opposite.

A bit of background:


Advanced Technology Vehicles Manufacturing (ATVM) Loan Program is a $25 billion direct loan program funded by Congress in fall 2008 to provide debt capital to the U.S. automotive industry for the purpose of funding projects that help vehicles manufactured in the U.S. meet higher mileage requirements and lessen U.S. dependence on foreign oil.

http://en.wikipedia.org/wiki/Advanced_Technologies_Vehicle_Manufacturing_Loan_P rogram


USDOE announced in 2009 $8 billion in conditional loan agreements for Ford Motor Company; Nissan North America, Inc.; and Tesla Motors, Inc. to fund the development of advanced vehicle technologies. The loan commitments include a $5.9 billion loan to Ford for upgrading factories in five states to produce 13 more fuel-efficient models, a $1.6 billion loan to Nissan to build advanced electric vehicles and advanced batteries, and a $465 million loan to Tesla Motors to manufacture its new electric sedan. These are the first conditional loans released under DOE's Advanced Technology Vehicles Manufacturing (ATVM) Loan Program, which is using an open, competitive process to provide about $25 billion in loans to companies that produce cars or vehicle components in the United States. To qualify, companies must propose projects that increase fuel economy to at least 25% above 2005 fuel economy levels.


The fourth conditional commitment the Department of Energy has entered into under the ATVM Loan program is a $528.7 million loan for Fisker Automotive for the development of two lines of plug-in hybrids by 2016

----------------------------------------------

With the approval of the Obama administration, an electric car company that received a $529 million federal government loan guarantee is assembling its first line of cars in Finland, saying it could not find a facility in the United States capable of doing the work.

Vice President Joseph Biden heralded the Energy Department's $529 million loan to the start-up electric car company called Fisker as a bright new path to thousands of American manufacturing jobs. But two years after the loan was announced, the company's manufacturing jobs are still limited to the assembly of the flashy electric Fisker Karma sports car in Finland.
http://abcnews.go.com/Blotter/car-company-us-loan-builds-cars-finland/story?id=14770875

They appear to be in the middle of vamping up a former GM plant in Boxwood.

http://www.motorauthority.com/news/1045542_fisker-automotive-gets-loan-to-resurrect-gms-boxwood-plant

Here is what the company says about the loans:
http://media.fiskerautomotive.com/global/en-us/Media/PressRelease.aspx?mediaid=567&title=fisker-statement-re-misleading-news-reports

FWIW.

My take is that they are having some problems not entirely unexpected from a start-up car company.

I see some glimmerings of financial problems, so this could quite possibly be another Solyndra, much to Yoni's delight, I'm sure.

[Winehole23]

The Obama administration ended the government’s historic nearly five-year intervention in the U.S. (http://www.detroitnews.com/article/20131209/AUTO0103/312090064#ixzz2n16gpzmh)autohttp://images.intellitxt.com/ast/adTypes/icon1.png sector Monday. U.S. Treasury Secretary Jack Lew said it had sold its final shares in the Detroit automaker, leaving taxpayers with a $10.5 billion loss on the $49.5 billion bailout.http://www.detroitnews.com/article/20131209/AUTO0103/312090064#ixzz2n1mXoVIf

[Winehole23]

related: http://www.spurstalk.com/forums/showthread.php?t=193349

[Wild Cobra]

I say we should tax everyone who was for it more.

[TDMVPDPOY]

THESE mofos are holding aust govt to ransom cause they employ like 3000 in their manufacture factory plants, and then u got the 2nd and 3rd parties like spare parts suppliers...they are closing the factory moving production back to america

the biggest scam down here is fkn businesses barrowing bailout packages from the govt paying whatever withstanding debt or any debt at all then closing down with a surplus of cash in their bank accounts, fkn dodgy fuckers....or else the govt shouldve just let them roll over and declared baankrupt instead of bailing them out costing the taxpayer and state/fed budget where that money couldve been better spent elsewhere....

[Fabbs]

Barry you let us down.
Could have lifted the limit on executive pay (ok we'll suppose GM really is having trouble attracting *top talent* while the limit was in place).
Still no reason to forgive the 10 bil remaining.

[Nbadan]

I guess success depends on how you define it...

Study: 'Successful' auto bailout of GM, Chrysler saved millions of jobs, $284B in personal income
Source: MLive


The U.S. government's $85 billion bailout of General Motors Co. and Chrysler Group LLC was more successful than many first anticipated, according to a new study released today.

The Center for Automotive Research study -- called ''The Effect on the U.S. Economy of the Successful Restructuring of General Motors'' --€“ found that the controversial 2008-2009 bailout, saved 2.6 million jobs in 2009 alone and $284.4 billion in personal income was preserved over 2009-2010.

CAR concluded that if the U.S. government had refused to assist GM and Chrysler in their financial crisis of "unprecedented proportions," then the whole U.S. economy would be ''operating without a safety net, with the exception of course, of the banking system.''

The study, which was independently funded by the Ann Arbor-based nonprofit center, comes as the U.S. Treasury is expected to fully exit the Detroit-based automaker by year's end. Once the government completely exits GM the government estimated it will lose about $10 billion, which remains far less than some first predicted.

Read more: http://www.mlive.com/auto/index.ssf/2013/12/study_successful_auto_bailout.html#incart_river_de fault

[boutons_deux]

"safety net, with the exception of course, of the banking system.''

:lol the criminal, corrupt, hyper-leveraged, bankrupt financial system is a safety net? :lol

assholes here swallow the Repug/Fox lies and propaganda as if it were the semen of eternal life.

It's so badass Macho Man to want 100Ks of people to have lost their jobs

[Winehole23]

I guess success depends on how you define it...

Study: 'Successful' auto bailout of GM, Chrysler saved millions of jobs, $284B in personal income
Source: MLive


Read more: http://www.mlive.com/auto/index.ssf/2013/12/study_successful_auto_bailout.html#incart_river_de faultindustry funded research blesses the bailout. what a surprise.

[Winehole23]

That’s one reason that the $11 billion loss is something of a misleading indicator. Another is that the government could have waited longer for its shares in the company to appreciate, but chose to sell sooner rather than later to avoid the impression that it was picking winners. Canada’s government, which also funded the rescue to protect GM facilities there, is still holding on to its stock. (http://www.reuters.com/article/2013/01/04/canada-autos-idUSL1E9C45BO20130104)http://qz.com/155755/bailing-out-general-motors-cost-the-us-government-11-billion-and-it-was-worth-every-penny/

[TDMVPDPOY]

down here it is closing its doors in 2017...lol selling bullshit oversize cars and overpriced, lol typical factory worker there gets paid 50-60k minimum, thats fkn more then what low paid workers in other sectors or interns...and all these clowns do is put in a screw here and there.

[boutons_deux]

typical factory worker there gets paid 50-60k minimum, thats fkn more then what low paid workers in other sectors or interns...and all these clowns do is put in a screw here and there.

mentality inherited from England.

[TDMVPDPOY]

lol ford pulling out of this country, taking back manufacturing jobs to america and 15000 reportedly to asia...

if the yanks up so upbeat about jobs loss to overseas and the NFD, why not pull out from every country all manufacturing and outsourcing jobs back to america?

seriously if you put jobs at the lowest scale of pay, u tellin me people wont apply for it? when people are desperate for a job then will accept any job....

[boutons_deux]

"people are desperate for a job then will accept any job"

what value is modern, industrial, post-industrial society where millions people are poor and desperate for any (shitty, low paid) job?

[Winehole23]

cheap, plentiful labor great has bottom line value for industrialists and investors.

[boutons_deux]

cheap, plentiful labor great has bottom line value for industrialists and investors.

The 1%(aka capitalists/shareholders/bondholders)/VWRC/UCA War on Employees, sanctioned and kicked off by St Ronnie firing 11,000 ATCs, is as real and effective as the War on Women.

If median salary since the 1970s had kept up with GDP, it would be not about $50K, but $90K+.