GM’s Whining Bondholders

By Felix Salmon
March 31, 2009

Andrew Ross Sorkin takes aim at GM’s bondholders today:

Not three hours after the president spoke on Monday I received an e-mail message from a group representing G.M. bondholders — people who are likely to have an enormous influence over the future of the Detroit carmakers…
By the end of the e-mail message, they were complaining that they were “very disappointed that the government and company have had virtually no real dialogue with bondholders while designing the proposed restructuring plan.
The e-mail message came from the same group that two weeks ago grumbled that “G.M. bondholders have been asked to make deeper cuts than other stakeholders,” and threatened to send G.M. into bankruptcy…
I called Gabe Roth, the spokesman listed at the bottom of the message, and asked if I could speak with some of the bondholders the committee represents. The answer: “No. We’re not making them available.”
I followed up by asking which investors were members of this ad hoc committee. “We’re not making that public,” Mr. Roth said.
I reminded Mr. Roth that government money was at stake, and that we taxpayers might end up bailing out the bondholders. Doesn’t the public have a right to know whom they are negotiating with — or against? He demurred.

Sorkin does mention that Pimco is one of GM’s largest bondholders; what he doesn’t mention is that as recently as January, the head of Pimco, Bill Gross, was saying this, as he unilaterally withdrew from the GM negotiating committee:

“We have the interests of our clients more at heart than the interests of particular corporations or even the government, I guess, so it’s best that we simply look at the situation from afar as opposed to from inside.”

When Pimco’s GM’s largest bondholders behave like that, is it any surprise that they haven’t had much in the way of “real dialogue” over the restructuring plan? After all, it’s not as though their demands would come as any surprise: they want more money. And if they want to, they can force GM into bankruptcy — which is a pretty likely outcome in any event. But so long as they’re moaning from behind a cloak of anonymity, there’s really no reason to give them any sympathy at all — they’re asking for a government bailout just as much as GM’s management is, but they have a much weaker case for getting one.

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