That's consistent with my calculations. I don't believe we will get anywhere close to par value from the chapter 11 liquidation proceedings. I'm anticipating between 40 and 60 percent of face value, probably closer to the 40 percent mark than the 60 percent.
After Old-GM has been liquidated, and New-GM goes through the IPO process, I'm predicting that we will be a lot closer to a full face value recovery. That said, 2011 should be a pretty good year.
As reported on the Debtors' website, all of the publicly owned stocks and bonds previously issued by General Motors Corporation ("Old GM" or "Debtors") are still securities of that company, which has been renamed Motors Liquidation Company. On July 10, 2009, the Debtors closed the sale of substantially all their assets to NGMCO ("New GM") pursuant to Section 363 of the Bankruptcy Code (the "363 Transaction"). Pursuant to the Master Purchase Agreement, on the Closing date, New GM issued approximately 10% of its stock, and two sets of warrants worth approximately 15% of its stock, to Old GM, now known as Motors Liquidation Company. If the estimate aggregate allowed general unsecured claims against the Debtors' estates exceed $35 billion, New GM will issue an additional 2% of its stock to Old GM.
On July 5, 2009, the Bankruptcy Court approved an amended debtor-in-possession financing facility (the "Amended DIP Facility") whereby the U.S. Treasury, as the debtor-in-possession financing lender agreed to provide $1.175 billion (the "Wind-Down Budget") to fund the Debtors' liquidation. The Amended DIP Facility became effective upon the closing of the 363 Transaction. The Debtors, the Committee and the U.S. Treasury worked diligently to develop a Wind-Down Budget that would be sufficient to cover the administrative expenses of winding down the Debtors' estates. Assuming the Wind-Down Budget is sufficient, it is expected that the 10% stock, the 15% warrants (and if the unsecured claims pool exceeds $35 billion, the 2% stock) will be available for distribution to the Debtors' general unsecured creditors. Such distribution, however, is subject to the proposal and confirmation of a chapter 11 plan of liquidation. The Debtors estimate that a plan of liquidation will be filed during the second quarter of 2010.
Go to Wilmington Trust web site
Go to notices [left side]click
Go to 06/08/2009 click
Go down half a page and you will see form 8K. Go to the third page of the form [count front page as page one]
The "senior unsecured claims" are at the front of the line to receive the shares and warrants. Until that class of debt is made whole, none of the junior classes are entitled to any compensation. At least, that's how it's supposed to work in bankruptcy court.
The bond holders are alone in that debt class. If any of the junion debt does manage to get bumped into the "senior unsecured" class, they will make up a single digit percentage of that debt class. Ergo, the vast majority, if not all, of the shares/warrants will be issued to the bond holders.
The institution tasked by New GM to distribute the shares/warrants has until the end of May, 2010, to get "at least 70 percent of" the shares/warrants into the hands of the "senior unsecured" debtor class. If they achieve that, they get a $2.5 million bonus.
Most of the bond holders should have their new stock and warrants for New-GM by June 1st 2010, at the latest.
Brian, warrants give you the right to purchase shares at a given price. You still have to buy the shares (or trade warrants which should have a value). If shares are worth $60 and warrants can be exercised at $30 a share, they have a value of $30 plus premium for time value/potential appreciation (kind of like a call option). The other thing I notice everyone mistates is that bondholders get 10% equity and warrants. ALL unsecured claims of MTLQQ share the 10% and warrants. Bondholders are largest claim, so should get the majority.