It’s one thing to say that a firm might be better off in bankruptcy. It is another entirely to prod it down the plank towards the sea.
General Motors Corp.’s 60-day deadline to restructure is unlikely to be extended because the U.S. won’t repay $1 billion in convertible notes maturing June 1, according to a person with knowledge of the discussions.
President Barack Obama’s auto task force told the biggest U.S. automaker it doesn’t want taxpayer funds used to repay debt maturities, said the person, who declined to be identified because the talks are private. Detroit-based GM has $1 billion of 1.5 percent convertible securities coming due June 1. The debentures, issued in increments of $25, fell $2.05 to $7.20 as of 1:56 p.m. in New York, which would be the lowest closing price since December, according to data compiled by Bloomberg.
Funny, we don’t remember any sort of squeamishness about “taxpayer funds used to repay debt maturities,” before now. Why the sudden change in heart?
GM Said to Be Warned Government Won’t Make June 1 Debt Payment [Bloomberg]
ZeroHedge had an interesting point (“3-1 GM Digital Option”) earlier talked about some background. I don’t necessarily agree that the Debs will get redeemed at (or very close to) par to entice participation in a equity/debt exchange, but it is possible, no doubt.
Taxpayer funds are to be used exclusively for the banking friends of Timmy in NYC.
No one else.
This is a huge game of chicken – which the US is about to win. Bondholders, unions and pensioners are all on notice that Obama will take GM to bankruptcy if they cannot negotiate a solution.
Since the original bailout, GM, bondholders like Pimco, and the UAW have all been dicking around figuring Obama is so cuckolded by the union that he’ll just continue to throw money at the problem. Or at least they can hang on a few more months and collect paychecks.
But now the jig is up. Wagoner ignored the instructions to come up with a real plan so he got tossed. Gettelfinger and Bill Gross are on notice.
This is going to be entertaining…
He’s going to bail them out
Because GM is not a systemically important financial institution. This has been yet another edition of Simple Answers to Simple Questions.
They are all masturbating in a closet – GM will never get their shit together regardless of the direction they go. It’s about customers and they don’t have any. Their competition is drilling them into the ground. Goodbye Mr Junk Wrench.
Strangely, I am not comforted by the fact that the government will back all GM warranties.
The DMV or filing for unemployment is bad enough! Trying to get work authorized for your car from the government?
This is the end, beautiful friend,
This is the end…
Jim
Ok…off topic, but I was out of town last week.
Just saw on smokinggun.com that the Shamwow guy got busted for slapchopping the hell out of some hooker.
I’m guessing DB missed it, because it surely would have been in the “most commented” section.
Toodles.
-BeckyBootFan
@7
Please read http://business.theatlantic.com/2009/03/obama_wont_repair_your_car.php
@6
Based off what information are you making a claim that GM has no customers? They’re finally making progress in bringing their quality, design (huge factor, see Caddy, Saturn), etc up to the level their competitors were at (years ago, but its a start).
@7 – the gov’t isn’t going to do crud to backup your warranty – that is just PR to unload the all the cars GM has sitting in inventory.
The practical effect is either the successor to GM will agree to honor all of the warranties as a condition of DIP financing or the government will pay Ford to do it.
@9
covered ad naseum.
12 here, “nauseum.” fuck you.
I will buy a GM if I get a government grant to pay for it. And if I am guaranteed that if it sucks I only have to be on the hook for 5% of the loss. And if I don’t have to drive it.
evelyn davis is a nazi, yes?
Charles Gasparino was Client #8.
$20k for 2010 loaded escalade and I’m in! warranty or not.
the answer is simple: this is a thin skinned and reactive government. stung by all the talk of AIG bailout money going to goldman sachs etc and fearing another rant from queen maxine, obama is making sure that no money flows to funds and banks who held the debt. there’s nothing more complex to it than that. it’s just PR (which is a pretty crap basis for major business decisions).
Sure, no sane consumer would buy a US-built car without a secure warranty, so Obama’s pledge does fix that problem.
But who is going to pay near-full-price for a car that’s been end-of-life’d?
The resale value of that Pontiac Vibe you are eyeing is going to zero when Pontiac is defunct and not wasting huge amount of money advertising the brand.
There will be an immense markdown on the inventory of discontinued lines.
this should have happend months ago, government shouldnt be involved.. this shouldnt be news
@19…17 here. I think I’m sane?
They should keep Cadillac, Buick and maybe GMC trucks; sell of the rest. I am calling my plan “Bad GM, OK GM”.
Buick?? That brand already has one foot in the grave.
…but all the big bondholders have CDS on the bonds with AIG, and the government is going to cover those at 100%.
It’s a win-win. No recovery in bankruptcy, you get your money back. Recovery in bankruptcy, you get your money back AND whatever you recover, since AIG is far, far too screwed up to try to subrogate your recovery.
because GM should have been building cars, not pretending to be a bank. they sold these so they would get a bailout.
Also — Buick is the most prestigious brand in China. No, really. It is!
AIG aint paying par for GM CDS -
Obama is playing hardball now – he has no political risk – Country is behind him and Republicans are against everything – Like it or not – Obama is king
‘splain me this-
A warranty on a car sold prior to a hypthetical bankruptcy is a prepetition claim, i.e., screwed.
But a warranty on a car sold during the bankruptcy is administrative expense of the bankruptcy estate and therefore given the highest possible priority.
Therefore, why does the government need to guarantee warranties?
you’re wrong 27.
for years, liberal democrats used the courts as the de-facto legislative and executive.
think abortion, ralph nader, sierra club, you know, that sort of shit.
it’s all going to come back in their faces now as the liberal democrats have finally regained full control of the legislative and executive branches.
but guess what happened?
republicans have been stacking the federal court system, including the supreme court, with lots of judges who actually have respect for real law, not made up law.
laws like title 11, you know, that shit.
we’re going to be revisiting all those kooky decisions made during the depression when the courts agreed that coal mining wasn’t commerce.
you guys agree that’s sort of kooky, right?
grab your popcorn.
obama better get ready for some serious bitch slapping from roberts.
he already started slapping him around a little on inauguration day.
com’on, how entertaining is going to be watching republicans run to the courts each time they want to ram a legislative or executive branch issue down your throat?
Short-maturity bondholders might try to string this thing out, thinking the government will pay off to keep GM out of court. They would form a natural no bloc against any restructuring. Now if labor is getting paid and debt is current, all out of government injections, who gains by conceding?
GM going bankrupt is a huge positive for the company and country. Their cars are completely underrated by the general populous. The UAW is deeply unpopular and probably hurts sales as much as the poor quality perception. A clean start is a good thing for any viable enterprise, and unless totally screwed up in the next few months, GM should be a very good competitor.
More important is that Obama pulled the plug. I don’t want government messing around with private enterprise, but the key is that it isn’t; GM is going bankrupt, not bailed out. Management, shareholders, bondholders and the UAW are getting a well deserved hit.
Any guesses as to what was said last Friday to the bankers? Perhaps “you’re next.” The country can’t afford more bailouts, and hopefully the clean up is only accelerating from here. Citi at the minimum probably gets nationalized and split up, and who knows which other companies. Geitner, Bernake, etc…may not be the dream team, but they’re not total idiots. If the government has a stake, they want it fixed and spun out, and as an above commenter pointed out, Obama is not beholden to the unions. Governor Patterson on the hand…
Says that this is the end for bank money, at least via Congress. They have the TARP, they have the alphabet soup of Fed facilities. That’s it.
@33 correction. Geithner is a complete idiot, and Bernanke is already tarnished from advocating TARP. Rather than abrogate faulty contracts (call them CDS, CDOs, or subprime mortgages), they are willing to debase the currency AND encourage other countries to do the same. One can only hope and pray that the G20 partners will wise up Obamarama.