Small group of GM bondholders rally for a better deal

WARREN, Mich. (AP) — Individuals who hold General Motors Corp. bonds said Wednesday they want a better deal than the debt-for-equity swap the company is offering.

At a news conference in the Detroit suburb of Warren, several bondholders from as far away as Colorado said holding stock in a newly restructured GM doesn’t compare to the bond interest payments they rely on to supplement their retirement or pay property taxes or medical bills. They also said they can’t afford to lose the principal they lent to the company.

“We’re concerned that small bondholders like ourselves have been left out of the dialogue,” said Dennis Buckholtz, of Warren. “That doesn’t seem fair.”

GM is offering bondholders 225 shares of stock for every $1,000 in bonds, but analysts say those shares will be diluted when the government and the United Auto Workers get new equity in the company.

GM’s plan would give the UAW a 39 percent stake in GM if the union takes about $10 billion in payments to retiree health care trust in stock. The U.S. government would get a 50 percent equity stake in exchange for about $10 billion in loan forgiveness.

That’s expected to leave the bondholders with just pennies on the dollar for their 10 percent equity stake. Common shareholders would end up with about 1 percent of GM.

GM has until May 26 to convert 90 percent of its $27.5 billion in outstanding unsecured notes so it can receive billions more in federal aid and avoid filing for bankruptcy protection.

Chris Crowe of Lakewood, Colo., invested in GM bonds that mature around the same time his son Cameron would be ready to go to college, so he could use the returned principal to pay tuition. He’s counting on a May 15 interest payment to pay his property tax.

Crowe read a letter his son wrote to President Barack Obama explaining how his college hopes might be dashed if the value of his father’s bonds disappears.

“When my dad invested in GM, he said it was going to help me pay for college,” Crowe said, reading part of his son’s letter. “I even improved my grades. Mr. President please honor this loan.”

The bondholders assembled at Warren City Hall, where Mayor James Fouts called their plight “fundamentally undemocratic.”