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GM bondholders holding out for more
The General Motors logo is displayed at the New York International Auto Show in New York.
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TEXT OF STORY
Steve Chiotakis: It's turning into a contest of who'll fire the fewest people at Opel.
There are three bids on the table for the troubled GM European division. But Germany says bankruptcy is still an option. Opel employs half of its workforce there -- 25,000 people. Italy's Fiat has ramped up its offer for Opel by promising less jobless pain. While Canada's Magna International still appears to be the favorite.
Meanwhile, with a deadline looming tomorrow, GM bondholders are under pressure to forgive $27 billion worth of loans. But fearing that they're becoming scapegoats, many are hoping for a better payout. As Marketplace's Bob Moon reports.
Bob Moon: The bondholders are mostly big institutions -- among them pension plans and mutual fund investors.
But many are mom-and-pop retail investors like Mark Modica. He's a business manager for a Saturn dealership outside Philadelphia. And he personally bought tens of thousands of dollars in GM bonds. He questions why the government and union autoworkers should get control of almost 90 percent of GM. Bondholders are being pushed to take a bigger loss, but accept just a 10 percent shareholder stake:
Mark Modica: Under bankruptcy law, creditors are supposed to get equal treatment to labor and other creditors. But what's happened here with this administration is, they're just subverting the rule of law.
Modica says the government is steamrolling retirees, widows and other small investors -- and setting what he calls a dangerous precedent:
Modica: What'll happen is, you're never going to be able to raise capital through bond offerings again. No one's going to want to touch these things, particularly with unionized companies, since the administration is showing such favoritism to the unions.
Modica says rather than take the government's deal, he'd prefer to seek better terms in bankruptcy court -- and now expects to see that happen as early as this week.
I'm Bob Moon for Marketplace.
It matters not how much a bondholder paid for his investment (although most probably paid face) and it matters not who these bondholders are (although most are just directly or indirectly retired workers such as the UAW represents). So, why, and under what perverse rule of law, are the secured bondholders being moved from the front of the line to the back of the line while the unsecured UAW members are being moved from the back of the line to the front? Does this Administration have as a goal, consistent with its "spread the wealth" ideology, the destruction of the structures of a free enterprise economy. Are we seeing the not-so-disguised transfer of the means of production to the proletariat?
The Government and others including the UAW representative seem to think that all GM Bondholders bought their bonds at a discount of 10 to 15 cents on the dollar and that many will make money on the GM Exchange Offer. The fact is that the majority of the small individual bondholders paid full price for their bonds and counted on these GM Bonds for retirement. THIS LOSS WILL BE DISASTROUS FOR US AND OTHER RETIRED SMALL INDIVIDUAL GM BONDHOLDERS.
