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Thread: GM bankruptcy expected as bondholder offer fails

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    Re: GM bankruptcy expected as bondholder offer fails

    Quote Originally Posted by MrVicchio View Post
    We've tried so hard because it was the popular thing to do, because the UAW would be forced into a less... advantageous agreement.

    If I invest a million into a company, my money should come before someone who doesn't invest in said company, and further more, if that company is failing, I should get the most of my money back possible.

    That's how the world works.
    I do not think the UAW is why President Bush decided to bail out Chrysler and GM.

    If you invest millions in a company, you should certainly be in line to get money back, but if the company does poorly, you certainly should expect to lose money. The system as now has investors who actually benefit from a company failing, which is not a good thing.

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    Re: GM bankruptcy expected as bondholder offer fails

    Quote Originally Posted by RightinNYC View Post
    First, this isn't my area so don't take anything I say as authoritative (not that anyone should regardless of the area).



    The system isn't really any particular "way" - it is what it is. Whether bankruptcy is better than the alternatives depends on the facts of each particular case and the alternatives available.

    In most cases, there aren't really any alternatives. If a company can't find a buyer and can't make ends meet, there is just bankruptcy left. In those cases, there are very particular rules about who gets what. The creditors were aware of these rules when they made their investments, so they knew what they were getting into and what they can expect.

    The reason why there's so many alternatives in these cases is because the government has an interest in how the cases turn out, so they're inserting themselves into the process, whether by advocating for a particular division, making promises to various parties, or offering incentives for other companies to come in and purchase assets. The result of this is that the normal rules don't apply. Creditors who normally could have predicted what they would get no longer have any idea. On top of that, they're being outright threatened by the government that if they don't go along with what the government wants, they will be ostracized as "not playing nice" and will get on the ****list, which absolutely nobody wants to be anywhere near nowadays.

    It's creating a lot of uncertainty, and is having significant effects on how willing corporations (esp. investment vehicles) are to get involved in anything even tangentially related to the government.
    Thank you for the information.

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    Re: GM bankruptcy expected as bondholder offer fails

    Quote Originally Posted by winston53660 View Post
    Because all we do is create paper work. I'm an investor not a lawyer BTW.
    Create paperwork and uphold the rule of law.

    It is workers that create a product to sell from the assembly line worker to the engineer to the designer not the pencil pushers and they the workers creators are the people that are worth long term retirement investments.
    And those workers are compensated for their performance with their salaries. If they want more money, they're free to go find other jobs.

    You're also implying that the physical laborers are the only ones adding value. If not for the creditors, there would be no way to pay said laborers, nor to grow the business to where it is today.

    If a large manufacturer lost half its machine workers, it could keep operating at perhaps a slowed rate. If it lost half its creditors, its doors would close the next day.
    People sleep peaceably in their beds at night only because rough men stand ready to do violence on their behalf.

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    Re: GM bankruptcy expected as bondholder offer fails

    Quote Originally Posted by Redress View Post
    I do not think the UAW is why President Bush decided to bail out Chrysler and GM.

    If you invest millions in a company, you should certainly be in line to get money back, but if the company does poorly, you certainly should expect to lose money. The system as now has investors who actually benefit from a company failing, which is not a good thing.
    No investor is making more from the company failing than they would if the company had succeeded. Everyone is taking a haircut on this, the secured creditors most of all.
    People sleep peaceably in their beds at night only because rough men stand ready to do violence on their behalf.

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    Re: GM bankruptcy expected as bondholder offer fails

    Quote Originally Posted by RightinNYC View Post
    No investor is making more from the company failing than they would if the company had succeeded. Everyone is taking a haircut on this, the secured creditors most of all.
    I phrased it poorly. You are correct. However, the investors do stand to make more from the company going into bankruptcy, than from agreeing to the deals outside of bankruptcy.

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    Re: GM bankruptcy expected as bondholder offer fails

    Quote Originally Posted by Redress View Post
    I phrased it poorly. You are correct. However, the investors do stand to make more from the company going into bankruptcy, than from agreeing to the deals outside of bankruptcy.
    From what I've seen the secured creditors have a lot to bitch about.

    Getting a lesser stake while taking more risk is not an equal trade off.
    Bond holders get a lesser interest rate because their debt is considered secured.

    Where as a common stock holder does not have a secured debt and could potentially get nothing. They generally earn more than bond holders as long as the company does well.
    I was discovering that life just simply isn't fair and bask in the unsung glory of knowing that each obstacle overcome along the way only adds to the satisfaction in the end. Nothing great, after all, was ever accomplished by anyone sulking in his or her misery.
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    Re: GM bankruptcy expected as bondholder offer fails

    Quote Originally Posted by Harry Guerrilla View Post

    Workers do not own the jobs they do.


    Neither do investors. If I own 10k shares of GM or a 100k bond I do not own the corp.

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    Re: GM bankruptcy expected as bondholder offer fails

    Quote Originally Posted by winston53660 View Post
    Neither do investors. If I own 10k shares of GM or a 100k bond I do not own the corp.
    Your right but with bonds you have a secured debt via U.S. law.

    You have something at risk while a person who works at GM can find another job.

    Edit: Share holders are by definition owners.
    I was discovering that life just simply isn't fair and bask in the unsung glory of knowing that each obstacle overcome along the way only adds to the satisfaction in the end. Nothing great, after all, was ever accomplished by anyone sulking in his or her misery.
    —Adam Shepard

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    Re: GM bankruptcy expected as bondholder offer fails

    Quote Originally Posted by Harry Guerrilla View Post
    From what I've seen the secured creditors have a lot to bitch about.

    Getting a lesser stake while taking more risk is not an equal trade off.
    Bond holders get a lesser interest rate because their debt is considered secured.

    Where as a common stock holder does not have a secured debt and could potentially get nothing. They generally earn more than bond holders as long as the company does well.
    Actually, I should correct what I said anyway. A large portion of GM debt was bought up in the last year at discount prices by some hedge funds who are set up to do this. They are betting on getting more from the restructuring than they spent.

    Getting a lesser stake than whom? More risk how?

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    Re: GM bankruptcy expected as bondholder offer fails

    Quote Originally Posted by Redress View Post
    I phrased it poorly. You are correct. However, the investors do stand to make more from the company going into bankruptcy, than from agreeing to the deals outside of bankruptcy.
    That's because the deals outside of bankruptcy are blatant attempts to do end runs around bankruptcy law.

    Imagine that you own 50% of a company, I own 30%, and someone else owns 20%. Say that the rule is that if the company goes into bankruptcy, it loses 50% of its value, but each of us get the same proportion (so you get 25% of original value, I get 15, someone else gets 10%).

    Now say that right before it goes into bankruptcy, the government comes in and proposes a solution. They will save the company from bankruptcy by injecting an extra 10% of value (so the company will only drop to 60% of original value now). The only catch is that I get my full 30%, someone else gets their full 20%, and you're left with the remaining 10%.

    Is the government solution a better overall solution for the collective company? Yes, because it ends up with an extra 10% of value.

    Is the government solution a better value for me and the third dude? Definitely, because we make out much better than it would have if it had gone to bankruptcy.

    Is the government solution a better value for you? Absolutely not, because you're getting screwed. Instead of the 25% you would be entitled to in bankruptcy, you're only getting 10% in this deal. So, while the deal might be better in the aggregate, it's ****ing you over.

    If you had the legal right to prevent that government deal from going down, wouldn't you?
    People sleep peaceably in their beds at night only because rough men stand ready to do violence on their behalf.

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