Quote:
Originally Posted by wind_magic
Here are the only theories I can come up with for why the administration and the Congress are currently trying to ride roughshod over bond holders in favor of GM's UAW workers. I only have a few theories, I really can't think of any other reasons for it ...
- Maybe by threatening GM bond holders the administration hopes that they will soften bond holders up for a last minute deal. The theory here is that by scaring the hell out of GM bond holders they will be more willing to negotiate right before GM goes into bankruptcy, that they will give a little more, and that a deal will get done. There is some merit to this, GM bond holders have a very strong claim against the company, you basically would have to threaten them with total loss to get them to deal - but this plan would have a huge flaw and that is that GM bond holders are a very diverse group and they work slowly, you can't wait until the last minute to offer them a deal unless you are planning to extend things by giving GM more money to carry it through a for a few more months.
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And the winner is ... 1. soften GM bond holders up for a last minute deal.
Now the offer is 10% share plus 15% in deeply discounted warrants giving the administration about 75% ownership while it infuses another 30+ billion $us, a much better deal than the bond holders were originally getting. The administration also backed off of its threats and requirements that 90% of bond holders accept the deal, now they are just using the threat that if bond holders don't accept the deal they're going to get pushed around in bankruptcy court and end up being left with the tattered remains of whatever the new GM doesn't take with it. The last thing the administration wants at this point is for GM to fail, they've already tipped their hand. Score one for bond holders.
