GM Bankruptcy Thread
- Thread starter The Kin
- Start date
Based on the level of gov't intervention and the near complete lack of transparency on what is actually being done, this is shaping up to easily be the most interesting trading story of early '09.
I went into '08 long way-OTM GM puts, and am leaving it long GM debt and short GM puts. It is quite possible we will both make money on this last round.
update: GM has received its $4 billion
http://biz.yahoo.com/ap/081231/general_motors_loan.html?.v=4
some excerpts:
"Treasury today finalized the loan transaction for GM and funded the first tranche of $4 billion," said Treasury spokeswoman Brookly McLaughlin in a written statement.
"We appreciate the Administration extending a financial bridge to GM at this critical time for the U.S. auto industry," said GM in a written statement shortly after the Treasury announcement. "We are committed to successfully executing the viability plan we submitted on December 2 and remain confident in the future of General Motors."
GM is burning through approximately $33 million a day, based on spending $1 billion per month during the third quarter. That daily amount is likely lower for the fourth quarter as GM has reduced spending on operations, sponsorships, utilities and even office supplies.
WSJ version:
http://online.wsj.com/article/SB123074352400245865.html?mod=googlenews_wsj
Bloomberg version specifically states that the US Treasury and GM statements were made in emails:
http://www.bloomberg.com/apps/news?pid=conewsstory&refer=conews&tkr=GM:US&sid=atueEb9iEK0c
I am yet to see any comment in these stories about specifics of the equity provided to the US Treasury by GM. Until proven otherwise, I will assume that the terms of the announcement of 19 December remain in place.
http://www.treas.gov/press/releases/hp1333.htm
http://www.treas.gov/press/releases/reports/gm final term & appendix.pdf
http://biz.yahoo.com/ap/081231/general_motors_loan.html?.v=4
some excerpts:
"Treasury today finalized the loan transaction for GM and funded the first tranche of $4 billion," said Treasury spokeswoman Brookly McLaughlin in a written statement.
"We appreciate the Administration extending a financial bridge to GM at this critical time for the U.S. auto industry," said GM in a written statement shortly after the Treasury announcement. "We are committed to successfully executing the viability plan we submitted on December 2 and remain confident in the future of General Motors."
GM is burning through approximately $33 million a day, based on spending $1 billion per month during the third quarter. That daily amount is likely lower for the fourth quarter as GM has reduced spending on operations, sponsorships, utilities and even office supplies.
WSJ version:
http://online.wsj.com/article/SB123074352400245865.html?mod=googlenews_wsj
Bloomberg version specifically states that the US Treasury and GM statements were made in emails:
http://www.bloomberg.com/apps/news?pid=conewsstory&refer=conews&tkr=GM:US&sid=atueEb9iEK0c
I am yet to see any comment in these stories about specifics of the equity provided to the US Treasury by GM. Until proven otherwise, I will assume that the terms of the announcement of 19 December remain in place.
http://www.treas.gov/press/releases/hp1333.htm
http://www.treas.gov/press/releases/reports/gm final term & appendix.pdf
I agree that govt intervention is huge, and that there is a lack of transparency in the process, however:
(1) bailout plan requires GM to provide warrants over stock to US Treasury. $800 million today (20% of 4 billion) and then some more on 16 January and mid-February.
(2) current bailout plan requires GM to reduce debt by two-thirds, using a debt for equity swap.
(3) there is a lot of talk about equity to be provided to workers in exchange for benefits
All in all, I can understand why you may be long GM debt.
However even a short position in the $2.50 puts may be quite dangerous given the amount of new equity and warrants to be issued, excluding the $800 million today.
(1) bailout plan requires GM to provide warrants over stock to US Treasury. $800 million today (20% of 4 billion) and then some more on 16 January and mid-February.
(2) current bailout plan requires GM to reduce debt by two-thirds, using a debt for equity swap.
(3) there is a lot of talk about equity to be provided to workers in exchange for benefits
All in all, I can understand why you may be long GM debt.
However even a short position in the $2.50 puts may be quite dangerous given the amount of new equity and warrants to be issued, excluding the $800 million today.
Quote from Random.Capital:
Based on the level of gov't intervention and the near complete lack of transparency on what is actually being done, this is shaping up to easily be the most interesting trading story of early '09.
I went into '08 long way-OTM GM puts, and am leaving it long GM debt and short GM puts. It is quite possible we will both make money on this last round.
Of course. That's why I took it.
Max loan amount is $13.4B. Twenty percent of that is $2.68B. Exercise price of the warrants is ~$3.50.
Re: debt reduction - the headline version is quite a bit harsher than what is actually in the term sheet, which seems to give GM an awful lot of leeway on what it tries to do and what it actually accomplishes.
"... shall use their best efforts the achieve...Reduction of their outstanding unsecured public indebtedness...by not less than two-thirds through conversion of existing public debt into equity or debt...and other appropriate means."
And this is all from the Dec.19 term sheet - is there confirmation that today's payment is based on GM accepting this exact document?
Clear as mud, lol.
Anyway, if I get assigned, I own GM stock at a net of ~$0.50/share. I've suffered worse fates than that.
The GM debt/stock hybrid issues have been climbing ~10% a day. Closing a third, GTC exits in place on the rest.
Closing out another third of the bond/stock hybrids. In the absolute worst case - GM stock going to zero, and soon - the assignment on the "short GTZ puts" will now be "free".