The Bondholders Crack

Looks like GM's bondholders jumped aboard at the last minute:

The revised offer to the holders of $27 billion in unsecured GM bonds amounted to a take-it-or-leave-it ultimatum: Go along with what the government auto task force's proposal or be left holding the assets a new GM doesn't want — ones with presumably little value at all.

In addition to the 10 percent of the stock in a newly formed GM that was originally rejected by bondholders, the new offer would give them warrants to acquire an additional 15 percent stake at a deep discount. That would come only if they agree to support selling the company's assets to a new company under bankruptcy court protection.

Basically, the government made them an offer they could not refuse. I think they got a worse deal than Chrysler's bondholders.

As long as I view this as basically an extension of the stimulus package, I think I can live with it. But I still worry about the autoworker pensions coming out of these bankruptcies. That hasn't been well-defined just yet. And this isn't pleasing:

"We will come out of this rid of some of the historic legacy costs that have been dragging us down for the last 20 years or so," GM Vice Chairman Bob Lutz said Thursday at an Automotive Press Association luncheon in Detroit. "We will come out of it with an all new focus on product development."

I guess the retiree health fund gets a piece of the company in this deal, so maybe they can save something for the workers. But really this is just a bad scenario, especially if it fails to save GM or Chrysler. It's hard to feel good about these deals.