View Full Version : GM and AIG: Why bondholders might want bankruptcy

04-03-09, 01:23 PM
GM and AIG: Why bondholders might want bankruptcy (http://www.autoblog.com/2009/04/03/gm-and-aig-why-bondholders-might-want-bankruptcy/)

by Jonathon Ramsey (http://www.autoblog.com/bloggers/jonathon-ramsey/) on Apr 3rd, 2009 at 11:29AM
http://www.blogcdn.com/www.autoblog.com/media/2009/04/aig_gm_bktheory.jpg (http://market-ticker.org/archives/921-GM-Bankrupt,-UNLESS.....html)

Before we begin, let us state clearly that this is speculation by Karl Denninger at The Market Ticker (http://market-ticker.org/archives/921-GM-Bankrupt,-UNLESS.....html). Examining the various stakeholders' interests in General Motors, Denninger has come up with a scenario that supposes GM's bondholders might actually want the automaker to file for bankruptcy.

The bondholders appear to be the biggest obstacle to restructuring (http://www.autoblog.com/2009/03/23/gm-bondholders-not-digging-restructuring-plan/). They're not allowing GM to reach its government-mandated target for debt reduction because they would lose much of their investment in the process. According to Denninger, however, the biggest and most savvy of those bondholders could get 100% of their investment back if GM files for bankruptcy. Those bondholders would have had their bonds backed by credit default swaps (CDS), which Denninger supposes would have been written in large part by insurance giant AIG. If that's the case, then we the taxpayers are on the hook to repay 100% of those bonds because the government has agreed to fulfill AIG's CDS collateral

vett boy
04-03-09, 02:13 PM
I'd like someone to flush the toilet ,get it over with.If things we're done right GM could come back ten years from now bigger and stronger. (but keep Corvette :D )