GM Bankruptcy Thread
- Thread starter The Kin
- Start date
GM equity may be wiped out: Credit Suisse
Monday December 22, 8:25 am ET
(Reuters) - General Motors Corp's (NYSE:GM - News) equity may be largely if not entirely wiped out as it complies with the restructuring targets laid out in the federal auto bailout, an analyst at Credit Suisse said, cutting his price target to $1 and his rating to "underperform."
GM shares were down about 7 percent at $4.19 in trading before the bell Monday.
"Over the next two months...it will become increasingly clear that the enormous sacrifice of value on the part of the union and bondholders will require the complete or near-complete elimination of the existing GM equity," analyst Christopher Ceraso wrote in a note titled "Game Over for Existing Equity."
The U.S. government on Friday came to the rescue of U.S. automakers with $17.4 billion in emergency loans, some $13.4 billion of which will be made available in December and January, taken from a $700 billion Wall Street bailout fund originally designed to rescue struggling financial institutions.
The government attached a string of conditions to the three-year loans and set a deadline of March 31 for the automakers to prove they can restructure enough to ensure their survival or have the loans called back.
As part of the rescue, GM is required to reduce debt by two-thirds via debt-for-equity swaps, pay half of the contributions to a retiree health care trust using stock, make union workers' wages competitive with foreign automakers and eliminate the union jobs bank, which pays laid-off workers.
"If GM and its stakeholders can navigate through a tricky set of negotiations, and all parties can agree to sacrifice value in a manner consistent with the targets laid out by the government, we still arrive at a discounted cash flow-derived equity value of less than one dollar per share," Ceraso said.
If the bondholders and unions cannot come to an agreement over the amount of value to be sacrificed, GM may still end up in bankruptcy court, Ceraso said.
Ceraso previously rated the stock "neutral" with a price target of $2.
(Reporting by Tenzin Pema in Bangalore; Editing by Mike Miller)
Monday December 22, 8:25 am ET
(Reuters) - General Motors Corp's (NYSE:GM - News) equity may be largely if not entirely wiped out as it complies with the restructuring targets laid out in the federal auto bailout, an analyst at Credit Suisse said, cutting his price target to $1 and his rating to "underperform."
GM shares were down about 7 percent at $4.19 in trading before the bell Monday.
"Over the next two months...it will become increasingly clear that the enormous sacrifice of value on the part of the union and bondholders will require the complete or near-complete elimination of the existing GM equity," analyst Christopher Ceraso wrote in a note titled "Game Over for Existing Equity."
The U.S. government on Friday came to the rescue of U.S. automakers with $17.4 billion in emergency loans, some $13.4 billion of which will be made available in December and January, taken from a $700 billion Wall Street bailout fund originally designed to rescue struggling financial institutions.
The government attached a string of conditions to the three-year loans and set a deadline of March 31 for the automakers to prove they can restructure enough to ensure their survival or have the loans called back.
As part of the rescue, GM is required to reduce debt by two-thirds via debt-for-equity swaps, pay half of the contributions to a retiree health care trust using stock, make union workers' wages competitive with foreign automakers and eliminate the union jobs bank, which pays laid-off workers.
"If GM and its stakeholders can navigate through a tricky set of negotiations, and all parties can agree to sacrifice value in a manner consistent with the targets laid out by the government, we still arrive at a discounted cash flow-derived equity value of less than one dollar per share," Ceraso said.
If the bondholders and unions cannot come to an agreement over the amount of value to be sacrificed, GM may still end up in bankruptcy court, Ceraso said.
Ceraso previously rated the stock "neutral" with a price target of $2.
(Reporting by Tenzin Pema in Bangalore; Editing by Mike Miller)
GM bondholders are about to be sacraficed. Shareholders are the first sheep to the slaughter.
GM will be (nationalized) by the gov. taking x% in the company.
Who the hell really believes that we are not in the first phase of a Depression?
Pull your head outa your ass Mr. Sheepole. The worse is yet to come.
GM will be (nationalized) by the gov. taking x% in the company.
Who the hell really believes that we are not in the first phase of a Depression?
Pull your head outa your ass Mr. Sheepole. The worse is yet to come.
The "Stock Market" is toast IMHO. Sure, some will dip their toe into the markets, only to find that their rate of return will not be worth the risk. Market will come back, but IMHO, years down the road.
Plenty of other places to put money to work. Most require you to be wealthy. So, at the end of the day, the average person will have no choice but to build savings. Investments will be for the well off only.
Think about the 401 Ks that have been wiped out. GM, BS, and all the other equities held in those funds.
IMHO, Energy has the most upside in the future.
Plenty of other places to put money to work. Most require you to be wealthy. So, at the end of the day, the average person will have no choice but to build savings. Investments will be for the well off only.
Think about the 401 Ks that have been wiped out. GM, BS, and all the other equities held in those funds.
IMHO, Energy has the most upside in the future.
GM's market cap is down to $2B and the stock price is down 90% over the past year. I'd say Credit Suisse is a just a little late to this particular party...
For those keeping count at home, assuming that GM today draws down the 4 billion available today, the US government will receive 800 million (20% of 4 billion) in warrants to buy GM stock at $3.57.
At a closing price of $3.66 on 26 December, GM market cap was $2.23 billion.
Further information in this thread:
http://www.elitetrader.com/vb/showthread.php?s=&threadid=148514
and in particular, page 4.
Next drawdown date after today is 16 January (another $1.08 billion in warrants to be provided).
This ignores the dilution that may (will) happen as a result of equity being provided to employees and a debt-for-equity swap to existing bondholders.
I am still short GM calls and long GM puts.
At a closing price of $3.66 on 26 December, GM market cap was $2.23 billion.
Further information in this thread:
http://www.elitetrader.com/vb/showthread.php?s=&threadid=148514
and in particular, page 4.
Next drawdown date after today is 16 January (another $1.08 billion in warrants to be provided).
This ignores the dilution that may (will) happen as a result of equity being provided to employees and a debt-for-equity swap to existing bondholders.
I am still short GM calls and long GM puts.
In recent days (Monday 29, Tuesday 30 and today) there have been a few newswire articles about how the Treasury are finalising terms for the first loan drawdown for GM, which was originally scheduled for Monday 29.
Then today the AP published the following story:
http://biz.yahoo.com/ap/081231/treasury_autos.html?.v=2
****************************
Treasury lays out details for auto aid
Wednesday December 31, 2:01 pm ET
By Jeannine Aversa, AP Economics Writer
Treasury: any fresh auto aid would be weighed on case-by-case basis
WASHINGTON (AP) -- The Treasury Department says it will decide on a case-by-case basis whether other companies connected to the struggling automotive industry should be provided emergency aid from the government's $700 billion bailout pot.
President George W. Bush reversed course on Dec. 19 and announced a $17.4 billion rescue package for teetering auto giants, General Motors Corp. and Chrysler LLC, which were burning through cash and bleeding jobs.
The government earlier this week provided $5 billion in aid to GMAC Financial Services, GM's troubled financing arm.
In deciding whether to aid others, the department says it will consider "the importance of the institution to production by, or financing of, the American automotive industry," and whether a major disruption of the companies' operations would likely hurt employment and the national economy.
****************************
edited to update:
Also Bloomberg published the following:
http://www.bloomberg.com/apps/news?pid=20601087&sid=aR8huxXy_VWI&refer=home
****************************
I could not find information contained in the above stories (eg., that "The Treasury Department says it will decide on a case-by-case basis ") on the Treasury web site.
Does anyone know of a web site where I can find a/the original Treasury story that may have been released today?
Then today the AP published the following story:
http://biz.yahoo.com/ap/081231/treasury_autos.html?.v=2
****************************
Treasury lays out details for auto aid
Wednesday December 31, 2:01 pm ET
By Jeannine Aversa, AP Economics Writer
Treasury: any fresh auto aid would be weighed on case-by-case basis
WASHINGTON (AP) -- The Treasury Department says it will decide on a case-by-case basis whether other companies connected to the struggling automotive industry should be provided emergency aid from the government's $700 billion bailout pot.
President George W. Bush reversed course on Dec. 19 and announced a $17.4 billion rescue package for teetering auto giants, General Motors Corp. and Chrysler LLC, which were burning through cash and bleeding jobs.
The government earlier this week provided $5 billion in aid to GMAC Financial Services, GM's troubled financing arm.
In deciding whether to aid others, the department says it will consider "the importance of the institution to production by, or financing of, the American automotive industry," and whether a major disruption of the companies' operations would likely hurt employment and the national economy.
****************************
edited to update:
Also Bloomberg published the following:
http://www.bloomberg.com/apps/news?pid=20601087&sid=aR8huxXy_VWI&refer=home
****************************
I could not find information contained in the above stories (eg., that "The Treasury Department says it will decide on a case-by-case basis ") on the Treasury web site.
Does anyone know of a web site where I can find a/the original Treasury story that may have been released today?