Results 1 to 3 of 3

Thread: GM bailout screws stockholders ...

  1. #1
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default GM bailout screws stockholders ...

    just off the INO business news wire ...

    (snip)11:54AM General Motors: Fitch downgrades General Motors' IDR to 'C' (GM) 4.11 0.45 :

    Fitch has downgraded the Issuer Default Rating of General Motors to 'C', indicating that default is imminent. The rating action reflects the terms of federal government assistance that were announced today, which include a reduction in the current debt load. Debt reduction is expected to take the form of a distressed debt exchange, which is a default under Fitch's methodology, although how the exchange is to be accomplished remains highly uncertain. The ability of GM to use equity to address debt and VEBA obligations is very limited given the size of the obligations and GM's current market capitalization. The threat of a bankruptcy remains, given the terms of the federal assistance, and the maturity. Fitch expects the current agreement will be significantly restructured prior to its maturity. Recovery ratings for unsecured holders could move down further from current estimates of 10-30%. Under GM's plan, unsecured holders could lose 50% immediately under a distressed debt exchange. Recoveries will also be impaired by the potential elimination of any remaining value ascribed to GM's equity interest in GMAC, and the fact that government loans (or loan guarantees) will be placed in a senior position to exiting unsecured debt. (snip)


    in other words, rightly or wrongly, by accepting the bailout loan GM has actually DECREASED the future value of existing GM stocks and bonds ... because the bailout loan terms places the gov't first in line for repayment ahead of existing bondholders and stockholders.

  2. #2
    God/dess Deogol's Avatar
    Joined
    Dec 2003
    Posts
    5,493
    Thanks
    120
    Thanked 50 Times in 35 Posts

    Default Re: GM bailout screws stockholders ...

    The stock holders should have been exercising their vote and concerns at stock holder meetings and in the newspapers/blogs.

    There are a whole lot of people who have been letting their money go on "automatic" and it just doesn't work that way.

  3. #3
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: GM bailout screws stockholders ...

    ^^^ I happen to agree with your sentiment. However, the attorneys for the big retirement / hedge funds will claim that, by inserting itself at the top of the creditor list via the bailout loan terms, the US gov't has changed the rules after the game was already underway for pre-existing stockholders and bondholders. In point of fact, bondholders would have received more money from a bankruptcy now than from a bankruptcy next April !!!

Similar Threads

  1. Replies: 9
    Last Post: 05-23-2009, 02:36 PM
  2. Bailout Explained
    By xanfiles1 in forum Dollar Den
    Replies: 6
    Last Post: 10-03-2008, 12:58 PM
  3. Vote against the bailout!
    By luvbuniz in forum Dollar Den
    Replies: 19
    Last Post: 09-27-2008, 11:28 PM
  4. Replies: 4
    Last Post: 07-11-2007, 11:07 AM

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •