Anybody here know what's going on with GM bankruptcy court proceedings?

[CTyankee]

I am a senior bond holder. My preferred stock has gone UP! I didn't think I had it any more since I thought it was all dissolved with the bankruptcy. I've gotten some court papers but can't make too much sense of them...

[A HERETIC I AM]

1. What do the papers say? Are you a holder of senior debt AND preferreds?

What is the ticker of the preferreds? You can learn more of the specifics of your particular preferred at www.quantumonline.com (registration required, but no subscription)

You can find out their last SEC filings from the EDGAR website.

The actual disposition and/or settlement of each of the various (and there are dozens and dozens) debt securities issued by GM won't be known for quite some time.

[CTyankee]

2. Yes, I hold a lot of preferred stock and am a senior bond holder, much to my dismay.

I don't understand. Why has my preferred stock gone UP? I thought it was gone with the bankruptcy...can you explain?

[A HERETIC I AM]

3. Your preferred is likely not an equity security, it is a debt security.

Even though General Motors has filed Chapter 11, their common stock continues to trade, albeit no longer on the NYSE. It is trading "Over the Counter" but it is still trading. Your preferreds haven't gone away because they (again, likely. Without knowing the ticker or Cusip, I can't tell you any more) represent debt obligations as opposed to an equity stake in the firm. It's possible they have suspended the dividend by now but the reason they might trade higher is because the market is speculating their value has risen because of a possible settlement higher than previously anticipated. For example, if the security is trading at $1.00 but is likely to settle at $1.25, traders will bid them up to reflect that.

I'm not trying to pry into the details of your portfolio, but I would be happy to find out more of the particulars of your preferreds for you if you care to mention the ticker or Cusip. One or the other (or both) will be on your last statement. (I'm basically volunteering to read a prospectus for you!) :)

A possible explanation may be gleaned from a situation currently existing with Citibank preferreds. Citi has offered to exchange various series of their preferreds for Citi common stock. Here is an article from Bloomberg which discusses this exchange (dated June 10). They have issued a list of these securities, prioritizing them from 1 to 15. If the offer is fully subscribed (meaning they get enough of the holders to agree to the exchange) by say - level 10, then the securities on the list numbered 11 through 15 will be unable to take part. Situations like this can have an effect on the price of all of the securities on the list, as well as the entire spectrum of their issues.

[CTyankee]

4. I think, not sure, that the ticker is GMS. could that be right? nt

[A HERETIC I AM]

5. Yup. 7.5% Senior Notes due 7/01/2044

http://www.quantumonline.com/search.cfm?tickersymbol=GMS&sopt=symbol

You may need to register to see that page.

http://finance.yahoo.com/q?s=GM.SW

These and other similar issues appear to have been suspended from trading on the NYSE, just like GM's common. It's next coupon payment is due Wednesday (7/01) and it also appears to have been suspended, according to the Quantumonline site I linked before.

[A HERETIC I AM]

6. Here's the prospectus;

http://www.sec.gov/Archives/edgar/data/40730/000004073004000062/debt650m062404.txt

The Bonds will be unsecured obligations of GM and will rank equally with
all other unsecured and unsubordinated indebtedness of GM.

How much they will ultimately be worth is up to the bankruptcy court to decide.

[Yupster]

7. Isn't the settlement going to be

225 shares of the new common stock for each $ 1,000 of face value?

Then a 100 for 1 stock reverse split.

The fix is in since the White House cobbled together 51 % of the bondholders to agree after they voted over 90 % against basically the same offer when they had a chance to vote.

My guess is the change came when the White House convinced large institutional holders who have taken treasury dept. money that they better change their votes or their jobs and/or lives will be destroyed.

The bondholders were certainly treated unfairly, in my opinion illegally.

[A HERETIC I AM]

8. That was indeed offered last month (early May)

DU'r Trof is also a holder of GM 7.5% preferreds and his situation was discussed in this thread last month;

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=114x64617

The thing is, which GM common stock is going to be offered now that GM is in chapter 11? I would suspect it will be new issue shares and not the current common that trades OTC.

I agree completely with you re: treatment of bondholders. They were/are being forced to take it on the chin and that seems to me to be contrary to 100 years of precedent.

[A HERETIC I AM]

9. UPDATE: The stock exchange offer expired on May 26,2009

My apologies for not mentioning this before. The initial offer of 225 shares of GM common stock for each $1000.00 face value of bonds, both senior debt and preferred, has expired. I can find no further announcement or filing indicating or describing a new offer.

http://biz.yahoo.com/e/090528/gmgmq.pk8-k.html

[Yupster]

11. After the vote was shot down, the government announced

that they had met with the largest institutional bondholders and had gotten 51 % to agree to the same offer they had turned down by a 90-10 vote. Warrants were added for another 15 % but since no price or date was set on the warrants, there's no way of knowing if they will ever have any value.

I would love t have been in that meeting. I have a feeling that those large bondholders have taken government money and had conversations similar to that BAC guy with Bernanke. Something like if you don't chnge your mind you and your company will be destroyed.

The whole thing seems quite illegal to me.

[A HERETIC I AM]

13. I think I read that GM filing chapter 11 changed the whole ball game..

and since they did, all of that went away. There is no point in offering warrants on worthless common stock, or offering to exchange debt securities for the same. I'll have to see if I can find the article or the SEC filing that describes it.

One thing is for sure; The US Treasury is currently GM's largest creditor.

I admit I haven't kept up completely with every single development with this process. It certainly is interesting, if nothing else.

[Yupster]

14. The second deal was

what the government wanted to bring into the bankruptcy court.

The idea is to be able to tell the judge that everyone is on board with the government's proposal. The union agreed and so did the bondholders.

The stock will be shares of the new issue GM, and the warrants will be based on those new shares too, not the old worthless ones. The old stockholders will officially get nothing. The May proposal which was voted down allowed 1 % to the current stockholders if bankruptcy was avoided.

[CTyankee]

10. Do you think there can be some sort of class action litigation on this?

Of course, who would be the party sued?

[Yupster]

12. Sue the US Government

This was their proposal.

When the head of GM was asked why the bondholders were only offered 10 % in the May proposal, he said the government had expressly forbidden him to offer the bondholders any more than that.

It sure raised my eyebrows as I didn't think the government had that kind of power. Shows what I know.

[notesdev]

17. It doesn't!

This GM bankruptcy, the way it is proceeding, is completely and totally illegal, ignores the plain black letter of the law, and in and of itself may prevent this country from recovering anytime soon due to the destruction of the capital structure and politically-driven voidance of contracts. There is no law that allows what is being done; they are basically saying they're allowed to wing it if the situation can be portrayed as severe enough.

[Yupster]

18. Wouldn't you have loved to be in that room

where the administration got 51 % of the bondholders to agree to the proposal that they just voted 96 % against?

I hope that story is written in a book someday. I'd pay to read that one.

[trof]

15. I got the court papers too.

And I can't make heads nor tails of them either.
????

[notesdev]

16. Were I you, I'd sue

As a GM bondholder, you're getting reamed out of your legally-determined capital structure position, in favor of those who had junior/unsecured debt. Sucks to be stolen from, doesn't it?