GM's Baby Bonds

Discussion in 'Stocks' started by Babak, Nov 18, 2005.

  1. Babak


    Anyone know where along the hierarchy of debt the baby bonds (NYSE traded: HGM, GMS, etc.) reside?

    Can someone with Bloomberg or other such resource give a definitive answer?

  2. All I know is that they are senior...
  3. ...but unsecured, right?
  4. Isn't senior debt by definition secured?
  5. Secured debts would be mortgages for ppe usually. That's why the reporters aren't talking about the $285 balance sheet debt, because most of it is secured and not at risk to bond holders.

    Senior debts are debts that HAVE to be paid before other subordinated classes, like preferred and common stock. This doesn't mean that senior debt holders get 100% of their principal back, they just get first pickings of whatever cash and unsecured assets are left in a liquidation.
  6. bdon


    Lets understand, that should GM ever file bankruptcy there would probably be a .001% chance of a liquidation. It would be a reorganization. The Senior and preferred get f'ed with zilch. Bondholders would settle for some penny on the dollar type scenario, and some classes of bondholders would probably opt for stock in the reorganized company when it goes public again (see Kmart).
  7. It would definately be a reorganization, they would come back with a vengence too! Lookout competitors!
  8. As far as I know, secured debt generally means that the bond holders have rights to a specific asset in the event of bankruptcy (say GM owns any real estate etc). Once those have been handed out, next comes senior (unsecured) debt, then junior debt, then preferreds, then common. Others are up there: creditors, etc, and the order is not absolute (mainly because lawyers are expensive) and subject to the whimsical nature of the judicial system.

    Come to think of it, baby bonds bonds probably "have to be" unsecured because you'll never get a prospectus when you buy them, outlining your covenants with the stockholders. Plus, who'd pay the legal costs if the stockholders started selling stuff like GMAC.

    Does anyone know how much of GMs debt is secured?
  9. Go to your local library. Ask the reference librarian for the S&P Bond Book. You will find your answer under General motors.