GM Bondholders Threaten With Bankruptcy Unless They Get Attention

GM's bondholders have had enough of being ignored. In a letter released minutes ago, the ad hoc bondholder committee claims that on March 5th it had presented a framework for "constructing a successful debt-to-equity exchange to the Presidential Task Force on the Auto Industry." While it is unknown what the presented framework consisted of, the bondholders are "disappointed" that they have had no response yet from either GM or Steve Rattner's task force. And the tone of the letter gets uglier:

"We believe that, unless the framework we suggested is utilized, the restructuring currently contemplated will not achieve the required level of acceptance to succeed on an out-of-court basis. The result of such a failed exchange would likely be a bankruptcy that would have dire consequences for the company, the tens of thousands of hard-working Americans that GM employs and the economy as a whole."

The reason for bondholders' unhappines is that not only have their opinions not been met with the proactive attention that both GM and the UAW have been receiving from the administration, but also "bondholders have een asked to make deeper cuts than other stakeholders. All other parties will walk away with far more."

The letter concludes by saying that bondholders "hope that others involved in this process believe that beginning a real dialogue with the bondholders is more likely to lead to a successful restructuring of GM than engaging in public critcism of the bondholders' legitimate concerns." Nothing like a little hot potato on a Sunday afternoon.

Signatories to the letter are Eric Siegert from Houlihan Lokey, financial advisor to the ad hoc group, and lawyer Andrew Rosenberg of Paul Weiss, both of which firms stand to make a killing if GM does truly end up in bankruptcy due to the many years of monthly and otherwise fees they stand to pocket.

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