GM Bondholders Rally To Oppose Debt-For-Equity Offer
21 Mai 2009 - 7:28PM
Dow Jones News
Small investors in General Motors Corp. (GM) on Thursday accused
the Obama administration of shutting them out of negotiations over
the restructuring of the auto maker and demanded a meeting with the
president's auto task force.
About a dozen bondholders said at a morning news conference in
Washington that the task force, which is leading the restructuring
talks, has placed their interests far behind those of the United
Auto Workers union. They criticized a government-backed offer that
would give the bondholders a small equity stake in GM in exchange
for billions of dollars in debt, pointing out that the UAW has been
offered a bigger equity stake for a smaller amount of debt.
"We represent middle America. We are the savers," said Jim
Dillahunty, a retired bond trader from Southern California. "I
don't know of any speculators here. What we expect as lenders of
our hard-earned capital ... is fair treatment."
He was flanked by other bondholders, many of them retirees, who
held handwritten signs with messages such as, "Small Bondholders
Must Have Their Say." Members one by one stepped to a lectern and
described how they had purchased GM bonds years ago to save for
retirement or to finance their children's college educations. Now,
they said, their investments stand to be wiped out under a deal one
bondholder called "stunningly unfair."
The deal backed by the government calls for the bondholders to
exchange $27 billion in unsecured debt for a small equity stake in
a slimmed-down GM. The group, calling themselves "Main Street
Bondholders" and claiming to represent hundreds of small investors
around the country, spent Wednesday and Thursday lobbying members
of Congress to oppose the deal.
The bondholders said they have not been called to the table by
the Treasury Department's auto task force.
A Treasury spokeswoman declined to comment Thursday, but a
source familiar with the task force said the task force met with
bondholder representatives Wednesday night and Thursday morning and
continues to work with them in restructuring talks.
GM spokesman Greg Martin declined to comment on talks with
bondholders, but said, "It was very clear from the task force that
we needed to take more aggressive actions to restructure operations
and reduce liabilities and debt on our balance sheet."
The $27 billion in unsecured debt is held by small investors and
large institutions alike. The Main Street bondholders say about
quarter of all GM bondholders are "average" Americans who depend on
the investments for retirement, medical expenses, small-business
expenses and college educations.
Robert Mitchell of New Orleans said he and his wife first
purchased GM bonds 10 years ago, hoping the investment would
supplement their retirement savings.
"We had great plans, great hopes" for the investments in GM, he
said, adding their investments could be saved if the government
backed off on plans to push the company into bankruptcy. "The
company could survive if we could derail this bankruptcy."
Other bondholders have suggested they'd fare off better in
bankruptcy court than by accepting the company's current offer.
-By Josh Mitchell, Dow Jones Newswires;
josh.mitchell@dowjones.com; (202) 862-6637