GM bondholders are rejecting the exchange offer that would give them 10% of the company. I've always said that getting 90% of the bonds, given the widely dispersed ownership, was an extreme longshot.
But I hope the bondholders understand that now they get to share that 10% of "new GM" with the dealers whose contracts are rejected by GM. They are all unsecured creditors, after all. And I expect the dealers will have very large breach claims — there is no cap on their damage claims, unlike leases and employment agreements.
On the other hand, the marginal loss to any single bondholder is relatively small, so they may feel its worth holding out to see what happens in chapter 11. And some of them have CDS protection, which gives them no reason to fear chapter 11.
Between this and Chrysler's sale hearing on Wednesday, next week is shaping up to be chock full of chapter 11.
Comments
One response to “What do they think will happen now?”
A number of sources have speculated that GM will file bankruptcy regardless of the resolution of the unsecured bonds. The process would expedite their transformation and allow the “good GM / bad GM” separation that is being sought in Chrysler.
Personally, I believe that speculation has a great deal of merit.
Given that, if I were a bondholder I would not accept an offer of common stock that reduces my status in bankruptcy court. As a bondholder, I might have some recovery. As a stockholder, I would probably be wiped out or diluted beyond what has been presented in the out of court scenario.
If I understand the Code properly, the Debtor in Possession can ask the Court to reverse an exchange offer conducted prior to a filing if that exchange was recent. Am I correct in assuming that the creditors would NOT have that option?
Thanks.