Monday, July 6, 2009

Will The Big Money Post a Comment About Their Big Mistake?

I finally accessed the comments section on The Big Money blog. I left a comment about the post by Matthew DeBord in which he asks for the names of the dissenting bondholders and complains "Why can’t we learn the identities of these three holdouts?" He despairs that, "Whenever I see one of these reports, I’ve trained myself to expect this question to come up. But I’m getting tired of asking it."

The question he is referring to is the title of his blog post, Please Name Dissident GM Bondholders, Please.

As I noted in my last post, and in the comment that I left on The Big Money blog, the rest of the world has had the information he requested since June 6th.

The comment is awaiting moderation.

As I've noted before, I moderate comments on this blog. I believe it's the best way to maintain a civil conversation. That said, I've only rejected one or two comments in the 23 months that I have maintained this blog.

By the way, I'd appreciate any comments you might have.

We'll see if my comment is posted by The Big Money Blog soon (?).

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Anonymous said...

It seems that the hold outs can be an important piece in bankruptcy, even if they only represent a very slim minority of bondholders.

It seems like they can exercise a surprisingly high degree of influence over a company's court proceedings.

Would you say this is accurate? And, more importantly, are there other significant effects besides potential lawsuits?

Lawrence D. Loeb said...

Thank you for your comment.

To my knowledge, there were at least two sets of attorneys contesting the GM 363(b) sale on behalf of bondholders. One, the attorneys from Patton Boggs represented the 3 bondholders mentioned in my post; the other was Oliver Addison Parker, who represented himself.

Judge Gerber's decision, unless overturned by appeal, will end any influence that the bondholders will have over the 363(b) process.

There may be proceedings in the future relating to the distribution of the 10% equity stake among the bondholders and other unsecured creditors. This, however, will be done under the supervision of Judge Gerber.

The three holdouts disclosed by Patton Boggs were, according to them, only a few of the many bondholders that did not have (or, perhaps, want to have) their names disclosed.

Under the automatic stay granted under Chapter 11, there will be no "lawsuits" per se.

Any impaired creditor (a creditor who is receiving less through the bankruptcy process than owed them under existing contracts) may contest the distribution of assets under a plan. In this case, however, the 363(b) process is removing the bulk of assets from the Estate that will be distributing the assets.

In GM, unlike Chrysler, the secured creditors were unimpaired (they will become, as I understand it, creditors of NewGM with essentially the same terms as existed prior to the bankruptcy). The secured creditors, therefore, were not in a position to contest the 363(b) sale - if they had wanted to.

The bondholders, however, will be receiving a portion of the 10% equity and 15% warrants distributed to the Estate. That compensation is generally considered to be worth less than 10% of the principal due on the bonds. The bondholders, therefore, are impaired creditors.

I'm not sure what else you mean by "significant effects."