Here We Go Again: This Time Gov't. Is Trying to Shaft Unsecured GM Bondholders

NewsBusters ^ | May 22, 2009 | Tom Blumer

[Scanian]

Earlier today at my blog, I noted in a post updating the sad situations at bankrupt Chrysler and headling-for-bankruptcy General Motors, that GM is, according to a Wednesday Reuters report, offering secured bondholders a much better deal than the 29 cents on the dollar Chrysler's secured creditors have been offered. Chrysler's "non-TARP secured lenders," after what they allege with much evidential support was a campaign of threats and intimidation by President Obama and the White House, abandoned their efforts to have their first-lien rights recognized in bankruptcy court.

But Indiana pension funds holding some of that secured debt representing teachers, police, and other workers have taken legal action objecting to the terms of the Chrysler bankruptcy that don’t give first-lien lenders their proper and legal due.

It thus appears, despite a chest-thumping May 2 assertion in the New York Times that the White House's Chrysler hardball might have taught GM lenders a "lesson," that Obama and his car guys don't have the stomach for riding roughshod over the rights of GM's secured bondholders and ending up with the possibility of another bankruptcy moving into a regular federal district court (the Indiana situation could be the first).

[Natural Law]

In a bankruptcy unsecured debtors have no reason to expect otherwise.

[4rcane]

anyone know if obama shafted warren buffet too? He invested billions into GM as well

[gitmo]

Please explain secured and unsecured debtors for me.

[PGR88]

Unsecured debtors should have no expectations for debt recovery. I believe worker wages generally come ahead of unsecured debt.

Putting the UAW AHEAD of SECURED debtors is a completely different issue though

[Glenn]

In a bankruptcy unsecured debtors have no reason to expect otherwise.

I have always known bonds as secured debt. What am I missing?

[FastCoyote]

You have to figure Obama is unleashing a tsunami of lawsuits by shareholders and bondholders. Actually, this is our only hope, that everything Obama does goes FUBAR quickly and the rest of his term turned to charcoal by infighting.

[freekitty]

I think there was an article; but can’t locate.

[bert]

....I have always known bonds as secured debt....

Or, what exactly is an unsecured bond holder?

An unsecured debtor would be a commercial paper holder or a copy machine technician or an office supply house.

[FrankR]

Dear Atlas,

Der Guv_ment hast getaken over Gkenehral Motahs, so when I am needing a new khar, I denk I vill yust shrug venn I past a Gkenehral Motahs dealah (venn I kanst one finden).

If vee don't buy dem, comrad obama's plan to pay zee unions back for election go into das toileten. It ist time to gescrew him bock.

Danke

[RedStateGuyTrappedinCT]

I always understood bondholders to be first in line in the event of bankruptcy, followed by preferred stockholders and last by common stocholders. Is there a secured and unsecured bondholder? Or, is B.O. making a distinction between bonds held by the UAW pension fund and those held by other funds on his own? Maybe someone with expertise in finance can clarify.

[Oldexpat]

Generally, a secured debtor would have rights to specific assets..inventory, plants, etc just like a bank mortgage on your house. Unsecured bond holders have no specific security other than the companies promise to pay.
I think that both come before shareholders and suppliers in the rights. Employees do get first call for wages and benefits already earned. The retirement fund is independent and if fully funded would continue to pay.

[VeniVidiVici]

In a bankruptcy unsecured debtors have no reason to expect otherwise.

I think their contention is they would have a better chance at getting something should the automakers be forced to go through a regular bankruptcy rather than the "Obama Special". I agree.