GM Bondholders Group Not Contacted About New Offer -Source
09 April 2009 - 8:05PM
Dow Jones News
The ad-hoc group holding just under half of General Motors
Corp.'s (GM) subordinated debt said they haven't been contacted
with news of any new offer, according to a person close to the
bondholders.
The offer, reported earlier in the day on CNBC, of up to 20% of
equity in the firm was seen by traders as a low-ball estimate
coming from GM or the government. The person close to the
bondholders said bondholders have yet to see an offer and have not
participated in negotiations.
Calls to the Obama Administration and GM were not immediately
returned for comment.
News of the reported offer comes as the clock continues to tick
down to the administration's June 1 deadline for a viable
restructuring plan from the ailing auto giant. The government has
hired its own team of consultants and lawyers who are consulting
with GM insiders to beat the deadline. With the government and
company both raising the specter of a potentially disruptive
bankruptcy filing, tensions are high.
"It's all brinksmanship at this point," said Jon Duensing, head
of credit trading at Smith Breeden. "At this point I don't think
the bondholder group has a lot to lose anyway, so I would imagine
they are pretty resolute in their position."
Duensing said he is not involved with the ad-hoc group, but has
been working with his team on strategies for GM bonds. He said they
are actively contemplating the possibility of the government
changing the bondholders' contracts and "cramming them down" to
limit their rights.
"This is very far fetched, but we're in a far-fetched type of
situation right now," Duensing said.
The person close to the bondholders was skeptical of the
reported offer. With some $27 billion in unsecured claims
outstanding there would have been a total of $135 billion or more
in other claims on GM's equity for them to end up with just a fifth
of the company - assuming a standardized bankruptcy proceeding.
-By Andrew Edwards, Dow Jones Newswires; 201-938-5973;
andrew.edwards@dowjones.com