While generally against taxes, 60 Plus wants a taxpayer-funded handout for GM bondholders.
The so-called “Main Street” bondholders of General Motors Corporation are continuing their campaign to increase sympathy for their plight in the face of GM’s seemingly irreversible slide towards bankruptcy. The small bondholders are planning to make their case in Philadelphia, Pennsylvania, and Tampa, Florida, tomorrow to voice their concerns about being left out of the GM bankruptcy negotiations. They claim to want a fair and equitable solution. However, if the Chrysler bankruptcy proceedings are any indication, bondholders will have to take the current offer on the table from GM come June.
GM has offered bondholders 225 shares of GM stock for every $1,000 face of value of bonds, but the large bond holders have balked. GM chairman Fritz Henderson has described bankruptcy as the probable outcome if bondholders don’t accept the deal. The refusal by Chrysler bondholders to accept a similar offer led to its bankruptcy filing in April.
The bondholders are being joined by Philadelphia City Controller Alan Butkovitz. About a quarter of all GM bondholders are said to be average American citizens that invested in a once viable but now ruined company as part of their future financial plans, which included settling into retirement, covering medical expenses, running small businesses, and providing for their children’s college fund.
The rally was organized by “60 Plus,” an advocacy group for senior citizens based in Northern Virginia. “While we’re sympathetic to all parties in this negotiation, our government should also be sympathetic to small investors who may have invested their entire life savings in the General Motors Corporation,” said Amy Noone Frederick, a vice president of 60 Plus.
So far, the campaign hasn’t changed the basic terms of the debate over the GM bailout. Small investors admit they fear the hard line taken with bondholders by the Obama administration in the Chrysler matter, and is likely to take with GM bondholders as it goes into bankruptcy next month.
“We only want a fair deal,” said John Sion of Chicago, the owner of more than $700,000 in GM bonds, who showed up recently for a press conference and rally in shadow of the GM Technical Center in Warren, Michigan, at Warren City Hall.
Sion said he was concerned that the interests of small investors are being left out of the negotiations over the fate of GM. “I don’t want to see GM go bankrupt,” he said. “I don’t believe the (U.S.) government should be running GM,” added the 47-year-old Sion, who describes himself as a retired commodities trader.
However, the government has treated the current negotiation as a cram down, Sion said.
“Steve Rattner is taking a very hard line,” he said. “They’re setting the bondholders up as scapegoat if GM does go bankrupt because they don’t want to be accused of bailing out GM,” he said. “If something happens, they’re going to say it was bondholders,” Sion said. He did not remark on GM’s self-inflicted wounds.
Clifford St. Pierre, a retired Chrysler project manager from Grosse Isle, told the same rally that 80% of GM’s outstanding debt is held by 120 large financial institutions ranging from banks to hedge funds. But the other 20% of GM’s debt, which amounts to billions of dollars, is held by more than 100,000 individual investors.
“I feel that GM has a bright future,” St. Pierre said. “I don’t want to see it put into bankruptcy,” he said. “But we feel we are entitled to an equitable settlement,” St. Pierre.