GM bondholders propose debt-for-stock swap plan

[cal04]

Source: Marketwatch

A group of General Motors bondholders announced a plan that they say would help GM avoid bankruptcy and save U.S. taxpayers $10 billion in cash. The proposal involves allocating new GM equity equally across the board to union VEBA and GM bondholders, pro rata to the level of financial obligation owed to each by GM. The union VEBA, based on the current $20 billion in health benefits obligations it owes to retirees, would own 41% of the new GM. Bondholders, as a result of their $27 billion of notes outstanding, would own 58% of the new GM. Current shareholders would retain 1% of the equity of the new GM.

Read more: http://www.marketwatch.com/News/Story/Story.aspx?guid=%7BF5051978%2DB87F%2D49F2%2D9FFD%2D64A4E17B7FF3%7D

[CTyankee]

1. I own preferred stock in GM. Does anyone know how this would affect me?

I've been worried sick over this...

[Yupster]

2. It seems the stockholders are screwed either way

Sorry I don't know if preferred stockholders are treated any different than common stockholders. If the bond exchange goes through current stockholders retain 1 % of the company. If it fails the current stockholders get nothing in bankrupcy.

Some people think they own preferred stock when they actually own $ 25 par value bonds. If this is the case, you'd be part of the bond offer.

You'd get 225 shares of new GM stock for each $ 1,000 of bond face value. After the new company is created, there's supposed to be a 1 x 100 reverse stock split so you'd end up with 2 shares for each $ 1,000 of bond value.

On the other hand I believe the bondholders will vote the current proposal down so that makes it kinda moot anyway.