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.



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