May 28, 2009

Contact:  Sarah Jackson

202-527-0733

Main Street Bondholders Reject New GM Offer

New Deal Leaves Seniors & Retirees With Almost Nothing 

WASHINGTON—Main Street Bondholders today dismissed GM’s new debt-for-equity exchange proposal citing the gross unfairness in giving unions an estimated five times more dollar value per claim than the small bondholders. 

For example, on an assumed $25 billion valuation of the new entity, unions would reap 66 percent of their original claim while small bondholders will receive only 13 percent of their claim.

A spokesperson for the bondholder’s coalition said “in this new deal, the U.S. government appears to overtly favor the UAW members over America’s seniors and retirees.  The Main Street Bondholders intend to seek separate official committee status as allowed in section 1102 of the bankruptcy code. We have a large and growing concern of small bondholders, especially seniors and Baby Boomers who will receive next to nothing under this deal, and we want to ensure that the bankruptcy process is fair to everyone.  Thus we are seeking counsel for a separate class of small bondholders.”

“From the beginning there’s been a lack of transparency in this entire restructuring process.  No one seems to have the best interests of small bondholders at heart,” concluded Jim Martin, President of the 60 Plus Association, organizers of the bondholders coalition.

“Let’s finally start an honest negotiation in good-faith, because this has been a campaign of deceit from the beginning, starting with the blatantly unfair offer,” Mark Modica, Business Manager at a Saturn Car Facility from Chalfonte, Pennsylvania said.  “It’s time to look out for the interests of the small bondholders, GM, and America.  There’s no conceivable reason for every group at the table to get a better deal than the small bondholders. This deal is being financed on the back of public bondholders.”

“Mr. President, we appreciate your attempts to fix our economy, but please don’t break us in the process,” Catherine Graves, a Retiree from Celebration, Florida.  “The initial proposal had all of us looking into the abyss of despair, any improvement should represent some degree of relief.  As an enthusiastic supporter of President Obama, I was hopeful that he would appoint a task force having respect for his ideology.  For this reason, I am extremely disappointed by the apparent continued discrimination being shown to GM bondholders.  We are just regular, middle class citizens who have tried to live by American values, doing things right – working hard and saving for retirement.  What a sorry state of affairs this is for our new president who inspires hope in so many, and who, himself, represents the rewards that can be achieved by living by American values.”

This announcement follows the Main Street Bondholders’ legislative meetings on Capitol Hill last week voicing concerns over their exclusion in the GM bankruptcy negotiations and to push for a meeting with the Auto Task Force.  For the past several weeks leading up to the bankruptcy decision, the Main Street Bondholder coalition held press events with small bondholders in Warren, MI, Philadelphia, PA, Tampa, FL and Washington, D.C. to discuss the nationwide impact of the bankruptcy issue and to advocate for a fair and equitable solution for all parties. 

Main Street Bondholders is a project of the 60 Plus Association.  For more information, visit:  www.MainStreetBondholders.com. To find out more on how to connect with the small bondholders, please contact Media@MainStreetBondholders.com or 202-527-0733.

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“I wish the White House would take small bondholders into consideration the way they are taking the United Auto Workers into consideration,” Jim Graves, a former GM employee, said at a news conference.

“Small bondholders want to be part of the negotiating process,” said Joan Pryor, a former antiques dealer from Connecticut.

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By Jim Puzzanghera

Graves predicted that few bondholders would accept GM’s current offer and said that he and other small bondholders think they would get a better deal from a bankruptcy judge. He hopes it won’t come to that but says it will be the fault of GM and the government if it does.

“If they continue down this path, then they’re the ones who are forcing this into bankruptcy,” he said.

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He was flanked by other bondholders, many of them retirees, who held handwritten signs with messages such as, “Small Bondholders Must Have Their Say.” Members one by one stepped to a lectern and described how they had purchased GM bonds years ago to save for retirement or to finance their children’s college educations. Now, they said, their investments stand to be wiped out under a deal one bondholder called “stunningly unfair.”

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GM bondholders fight back

By Chris Isidore

But Graves and his mother now both find their retirement savings at risk. GM has indicated that it doesn’t have the $1 billion it needs to make payments due to holders of $27 billion worth of the bonds on June 1. Individual investors own an estimated $5 billion to $6 billion of that debt.

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Jim Graves, a 58-year-old software developer from Celebration, Fla., said that under those terms, he and his mother stand to lose most of the $100,000 in GM debt they have been counting on for retirement. “It’s stunningly unfair,” Graves said. He pointed out that compared with the unsecured bondholders, other stakeholders, including the U.S. government, would receive bigger equity stakes in exchange for smaller amounts of debt as part of the GM restructuring.

Graves said he and other investors met with staffers of Sen. Tom Coburn, R- Ok., and Sen. Joseph Lieberman, I-Conn., who were “sympathetic.” There’s no consensus among investors about what would constitute a fair deal, Graves said, but he emphasized that the main goal is that they are adequately represented in the negotiations.

“We have not been able to plead our case with anyone and we’ve basically had 30 days to respond to this horrific offer,” he said.

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What if GM Bondholders Got Cars?

Graves says his mother suggested his purchase of the bonds, and he liked the relatively high yield. Now, he says, “No one has explained to me the rationale where the government will forgive ($15.4 billion) and take 50% of the stock, while the bondholders will forgive $27 billion and take 10%.”

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By David R. Corder

“It’s the Obama administration and big unions that are saying, ‘This is what we should do,’” Martin said. “We think these small investors should have a voice. We’re out there pushing hard before this government-imposed deadline. We’re saying, ‘Let’s give these small bondholders a little bit of breathing room.’”

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