Is this true and the full part of the story?

[StageLeft]

Link

Do you hold GM bonds? Perhaps some so-called "unsubordinated" debt?

A lot of people - individuals - do.

These bonds were quite popular for college savings and other long-term plans - including retirement.

Why?

Because the coupon was pretty good, they were unsubordinated (meaning senior, or first) preference in the event of bankruptcy, and GM has been around for a very, very long time.

If you hold this debt you are about to be wiped out by our government, who has decreed by fiat, without even a vote in Congress, that:

You don't matter.
You don't have a right to rely on anything in the prospectus printed when these bonds issued, or even common and statutory law.
Your rights do not exist. Your government has literally declared economic war on you.
Let me be clear: The government, specifically President Obama's Treasury, is acting exactly as did George Bush's Treasury - they are behaving as gangsters who are about to rob you blind, returning only 10 cents - if that - on the dollar for your investment and they are going to force you to take it at gunpoint.

This despite the fact that the UAW is going to get somewhere between 80 cents and the full buck for every dollar they are owed for their VEBA.

VEBA obligations are unsecured and subordinate to yours under the law.

That means that under the law the UAW is entitled to exactly nothing until you get every dollar you are owed.

President Obama and Geithner have declared that it does not matter what the law says - they are going to do whatever the hell they want - and what they want to do is SCREW YOU.

They just got done ramrodding Chrysler bondholders with the exact same "deal", shoved down their throats, and allegedly enforced with threats of tax audits and other jackbooted actions if the bondholders resisted in court.

To be clear: You have every right, under the law, to receive full value for your bonds before anyone else gets paid for so much as one penny of the subordinated or unsecured debt owed to them, INCLUDING THE UAW.

You accepted a lower coupon in exchange for what was represented to be less risk as a consequence of this protection.

Now, after the fact, you are being robbed just as clearly as you would be if President Obama and Tim Geithner came into your house at 3:00 AM with automatic weapons and shoved them up your nose, stealing every penny you had.

I ask you this essential question:

If President Obama and Tim Geithner will steal from you in this fashion, literally at gunpoint, do you believe that your 401k or IRA will not similarly be confiscated whenever our government decides it wants to steal from you on similar "terms" - or when it suddenly "needs" some money (like when the bond market has had enough of this crap and stops being willing to finance a nearly $2 trillion annual deficit!)

If so, it's awful. Whether it's best for the economy or not (very dubious, obviously), the government should never be stepping clearly around bankruptcy law simply because it feels like it and, if this is the case, the argument at the end about 401k and IRA is very plausible. I know some people are worried about that and with good reason perhaps.

 

[CADsortaGUY]

This is what the people voted for. Hopefully now people will wake up. However, it is unfortunate that it takes something like this to wake people up.

 

[spacejamz]

yup...and the UAW, one of the main contributors to the mess the Big 3 is in, is laughing all the way to bank....

 

[Fern]

Is this true?

The essential basics, at least in the Chrysler case, look to be true. But I thought that was still in court (althought the Obama admin was offering about 30 cents, not zero IIRC). This author may be overstating it a bit, but IDK. 10 cents on the dollar for senior debt, and 80 cents on the UAW VEBA is BS IMO.

In a thread last week or so I argued that the Obama admin's action in Chrysler's case effectively robbed from 'Peter's' retirement to give to the UAW's retirement. (Peter being US citizens). Looks like what they are doing here.

In this case it's a VEBA plan, that's for health care IIRC. So instead of robbing somebody to pay another's retirement, they are paying for another's health care.

Fern

 

[Lemon law]

Excuse me Excuse me, tell me again how much those wondrous bonds would be worth in a GM bankruptcy. Yep, about the same or even less.

The same plight faces GM stockholders, they have elected the same ole same ole management who has fiddled as GM burned. They will take a bath too but at least they could have done something about it by elected better managers and did not. As it is there is a pile pf government money adding to the value of GM at any possible bankruptcy, and investors have to understand that investments are gambles, and sometimes gambles don't always pay off.

As soon as GM accepted huge government bail outs, the rules of the game change, if investors wanted to play the game by their old rules, they had to come up with the money to bail GM out. They could have and did not, end of story, and now its time for you winers to shut up or put up the cash to buy the government out of its GM investments.

 

[heyheybooboo]

Unfortunately, Karl Denninger's vitriol ignores the fact that GM's convertible debt has been trading at junk status since last Fall and even going back to August, 2007 (when this mess really started), was trading at $.80-$.90/dollar plus interest.

A year ago it was $.67/dollar - two months ago: $.33/dollar. Now? I'm sure you can grab as much as you want at $.10-$.15/dollar.

I got no pity for someone out to make a quick buck by grabbing up GM junk debt on the cheap hoping to make a bundle - especially people who whine and complain about it now.

 

[StageLeft]

Originally posted by: heyheybooboo
Unfortunately, Karl Denninger's vitriol ignores the fact that GM's convertible debt has been trading at junk status since last Fall and even going back to August, 2007 (when this mess really started), was trading at $.80-$.90/dollar plus interest.

A year ago it was $.67/dollar - two months ago: $.33/dollar. Now? I'm sure you can grab as much as you want at $.10-$.15/dollar.

I got no pity for someone out to make a quick buck by grabbing up GM junk debt on the cheap hoping to make a bundle - especially people who whine and complain about it now.

I truly have no idea why people are still holding common shares. The CEO weeks ago was talking about bankruptcy and now GM intends to completely dilute common shareholders with a reverse split and then reissue of billions of shares, wiping them out for all intents and purposes, and yet somehow people still think it's worth more than a buck.

 

[LegendKiller]

Denninger is an idiot. Without the UAW contract the company is worthless, utterly. The senior bonds would be completely wiped out, especially considering the virtual-DIP the government put in place is going to be senior (right pocket left pocket anyway).

When it comes down to it, senior secured bond holders had almost no hope of getting a better deal in BK. To even consider a BK settlement you'd have to stop the securitizations from utterly ripping the company apart (most will turbo on a BK). However, you can't. They are bankruptcy remote. Thus, the company cannot fund its business (dealer floorplan loans, retail loans and leases), unless the banks were going to double down.

If they weren't, then you get down to a situation of utter liquidation. However, what's there to sell? Factories? Who is buying them right now? PPE? Nobody wants it. So, more or less, you sell more distressed assets into a more distressed environment.

However, what's even more stupid is that once those assets flood the market, the assets that back the rest of the bonds the banks and funds own, become worth even less. Thus, the cycle continues.

Denninger is a complete fuckwad.

 

[LegendKiller]

Originally posted by: Skoorb

Originally posted by: heyheybooboo
Unfortunately, Karl Denninger's vitriol ignores the fact that GM's convertible debt has been trading at junk status since last Fall and even going back to August, 2007 (when this mess really started), was trading at $.80-$.90/dollar plus interest.

A year ago it was $.67/dollar - two months ago: $.33/dollar. Now? I'm sure you can grab as much as you want at $.10-$.15/dollar.

I got no pity for someone out to make a quick buck by grabbing up GM junk debt on the cheap hoping to make a bundle - especially people who whine and complain about it now.

I truly have no idea why people are still holding common shares. The CEO weeks ago was talking about bankruptcy and now GM intends to completely dilute common shareholders with a reverse split and then reissue of billions of shares, wiping them out for all intents and purposes, and yet somehow people still think it's worth more than a buck.

One thing people ignore is that they registered to issue billions of shares. That doesn't mean they *must* issue or *will* issue every one of those shares. Look at shelf registrations for shares, companies often have millions of extra shares registered for contingencies.

 

[SirStev0]

Originally posted by: Skoorb

Originally posted by: heyheybooboo
Unfortunately, Karl Denninger's vitriol ignores the fact that GM's convertible debt has been trading at junk status since last Fall and even going back to August, 2007 (when this mess really started), was trading at $.80-$.90/dollar plus interest.

A year ago it was $.67/dollar - two months ago: $.33/dollar. Now? I'm sure you can grab as much as you want at $.10-$.15/dollar.

I got no pity for someone out to make a quick buck by grabbing up GM junk debt on the cheap hoping to make a bundle - especially people who whine and complain about it now.

I truly have no idea why people are still holding common shares. The CEO weeks ago was talking about bankruptcy and now GM intends to completely dilute common shareholders with a reverse split and then reissue of billions of shares, wiping them out for all intents and purposes, and yet somehow people still think it's worth more than a buck.

Skoorb your two posts (this and the OP) seem very contradictory. I am missing what your argument is.

With that said, that OP article seems to be missing a very important fact, and that is, well, facts. The whole article is a bunch of speculation.

 

[Thump553]

I'd be extremely suspicious of the quoted article. It's an opinion piece. It's full of inflamatory conclusions and vague, overbroad statements of the bankruptcy law and essentially no factual statements. It is dificult to even get a handle on what the author is claiming-other than the UAW is evil, and he likes to use acronyms, without bothering to even define them, much less explain them.

For example, there is a huge difference between "unsubordinated" and "unsubordinable." Unsubordinated just means that the rights represented by the bond have not been subordinated YET. To determine whether the bond is subordinable, at a minimum one must read the language of the bond and then examine the precise fact situation.

These are almost certainly general revenue, unsecured bonds. As a practical matter, under bankruptcy statutes this means that the bond claims are subordinate to essentially all unsecured claims (such as wage, pension and benefits claims, tax claims, etc). The bonds merely have priority as over the equity holders (ie, shareholders). In other words, the author's claims of illegality are so much BS.

This much is certain. Bankruptcy law is codified in statute, and is pretty precise and clear. There is huge money in this case and you can be certain that if the government takes a position challengable under the law, it will be challenged. Rest assured that counsel seeking a huge windfall in legal fees will recruit bondholders as clients to oppose any voluntary plan and force a bankruptcy if they feel there is even a reasonable possibility that the bondholders will do better that wat,

To presume that "the government" can ignore the law, or change it on a whim, is naive, cynical and paranoid.