Bush to make auto announcement @9:00

Discussion in 'Wall St. News' started by wareco, Dec 19, 2008.

  1. No, it's a calculated deliberate lie. GM book value to debt is 1 to 3.6
     
    #11     Dec 19, 2008
  2. fhl

    fhl

    [​IMG]


    UAW Local 602 president: “It’s premature to speculate about wage cuts or if one will even occur.”
     
    #12     Dec 19, 2008
  3. It becomes more and more difficult to have any sympathy for these guys when they make statements like that.
     
    #13     Dec 19, 2008
  4. MattF

    MattF

    they don't want to change. At all. They'd apparently rather blow up everything and walk away then take any cut/concession.

    I like the band-aid comment...the fact now that the autoworkers union has to come up with change by 12/31/09 to be "competitive with foriegn companies."

    What's to say right now that the automakers will even be in business by then the way things are currently going?
     
    #14     Dec 19, 2008
  5. m22au

    m22au

  6. m22au

    m22au

    Usually Yahoo Messageboards aren't a good source of intelligent analysis, but I found a well-thought out piece below:

    ******

    As creditors come to the table to work out terms, you can expect some kind of equity swap. Maybe a combination of Preferred and Equity or New Debt and Equity but definately Equity.

    GM is required to reduce debt by 2/3. That doesn't mean that Bondholders will get 33 cents on the dollar. It means they will get 33 cents of new debt for every dollar of old. The difference will be made up with equity. With heavy hitters like PIMCO at the table. I think Bondholders will end up with 60-75 cents on the dollar.

    That means a lot of New Common shares will be issued. Look at BGM, HGM, RGM, XGM as plays in the GM swap game. Common is not where you want to be. Take your money and run.


    http://messages.finance.yahoo.com/Stocks_(A_to_Z)/Stocks_G/threadview?m=tm&bn=7869&tid=722082&mid=722082&tof=11&frt=2
     
    #16     Dec 19, 2008
  7. m22au

    m22au

    Yahoo board:

    The bondholders will just ask the current common to be wiped. And they will have all the leverage they need to do so. The bondholders are going to come swinging very hard because the Treasury said that they don't want employee pension and benefit obligation funds reduced (currently earned benefits). Bondholders normally have priority over these funds in bankruptcy, since these funds were originally funded by bondholder money, and they are not going to be happy that they are the only ones that are being asked to take a hit. They would vote no to 30% and fight for 50-60% and they have a lot of power since they can vote for GM to liquidate if they wish.

    m22au:

    The terms of the bailout (subject to Obama revision) state that the Govt loans are senior to all other debt.

    Another condition (subject to Obama revision) states that debt must be reduced by two thirds.

    If bondholders are unwilling to accept a debt for equity swap that sees them receiving less than 35 cents in the dollar, then they may choose to (1) refuse a debt for equity swap and (2) therefore force GM into bankruptcy, where they may be able to receive more than 35 cents in the dollar.
     
    #17     Dec 19, 2008
  8. m22au

    m22au

    Debt for equity swap:

    In addition to the Restructuring Plan, the Company and its subsidiaries shall use
    their best efforts to achieve the following targets:
    1. Reduction of their outstanding unsecured public indebtedness (other than
    with respect to pension and employee benefits obligations) by not less than
    two-thirds through conversion of existing public debt into equity or debt (a
    “Bond Exchange”) and other appropriate means;

    source = page 5 of bailout term sheet

    ********************

    warrants:

    The 15 day trailing average price determined as of December 2, 2008.
    The exercise price per share shall be subject to anti-dilution adjustments.

    The total number of warrants will be equal to 20% of the Maximum Loan
    amount divided by the Exercise Price per Share, provided that the number
    of Warrants will be capped at 20% of the issued and outstanding common
    equity interests of the company, before giving effect to the exercise of the
    Warrants (“The Warrant Limit”).

    source = pages 11 and 12

    ******************

    loan amount

    Up to $13.40 billion, to be made available to Borrower, upon request, as
    follows (subject to the Loan Parties’ satisfaction of the other terms and
    conditions of the Facility):

    Closing Date: $4.0 billion.
    January 16, 2009: $5.4 billion.
    February 17, 2009: $4.0 billion, contingent on Congressional action.

    source = page 15


    ******************

    Closing date = December 29, 2008

    source = page 15
     
    #18     Dec 19, 2008
  9. m22au

    m22au

    uncertainty and most retailers don't understand bonds. if you buy GMW a quib bond before 12/27/08 you will get a 13% interest payment on January 15th guaranteed. Then on top of that you will most likely get 40 cents on the dollar and new equity before March. A win win situation.

    http://messages.finance.yahoo.com/Stocks_(A_to_Z)/Stocks_G/threadview?m=tm&bn=7869&tid=722082&mid=722429&tof=19&rt=2&frt=2&off=1
     
    #19     Dec 19, 2008
  10. m22au

    m22au

    Exercise price for warrants:

    The 15 day trailing average price
    determined as of December 2, 2008.

    I calculated this to be $3.57 per share, using the closing prices from 11 November to 2 December. This assumes that "15 day = 15 business day". 15 calendar day average (17 November to 2 December) would be $3.79.

    Timeline for loan drawdowns (and therefore provision of warrants to US Treasury):

    Bush administration:

    29 December
    4 billion

    16 January 2009
    5.4 billion

    Obama administration:

    February 17, 2009
    4.0 billion, contingent on Congressional action.

    So assuming no changes to the bailout package between now and the Obama administration, and assuming that GM drawdown the entire amounts on 29 December and 16 January, then the following warrants will be provided to the US Treasury:

    29 December
    20% * 4 billion = $800 million

    16 January:
    20% * 5.4 billion = $1.08 billion

    total warrants = $1.808 billion

    As at 20 December, shares outstanding are 610.46 million * 4.49 = $2.74 billion market cap.

    Conclusion:

    Ignoring the potential debt for equity swap for bondholders, and ignoring the provision of warrants to employees in exchange for healthcare / retirement benefits, the stock could (should) be quite heavy as a result of the impending dilution from the warrants to be provided to the US Treasury on 29 December and 16 January.

    Positions: short GM and long GM puts
     
    #20     Dec 20, 2008