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GENERAL MOTORS CO. WARRANTS (E Message Board

  • cheblammo cheblammo May 3, 2012 2:07 PM Flag

    What Happened to the April Distribution?

    Supposed to be a distribution of shares & warrants to old bondholders "as soon as practicable after April 1st".

    What happened?

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    • See the wall st. Journal editoral page 6 /15/12. Very good article.

    • See the wall st. Journal editoral page 6 /15/12. Very good article.

    • In March 2012, it became apparent that the Trust would potentially be subject to a corporate level federal tax liability for any gains in the value of the New GM Securities held by the Trust from December 15, 2011 (the date on which such New GM Securities were received from Motors Liquidation Company) to the date of disposition of such New GM Securities (the “Tax Liability”). The Official Committee of Unsecured Creditors of Motors Liquidation Company (the “Committee”) was hopeful that relief from the Tax Liability would be obtained from the Internal Revenue Service (“IRS”) in a favorable private letter ruling (the “Favorable Private Letter Ruling”). The Committee had been pursuing the Favorable Private Letter Ruling since shortly after the commencement of the Motors Liquidation Company bankruptcy cases. Due to the uncertainty surrounding the potential Tax Liability at the end of March 2012, the Trust Administrator withheld New GM Securities from distribution in an amount that prevented a quarterly distribution in respect of Trust units that would otherwise be scheduled for April 2012 (the “Tax Holdback”).

      On May 7, 2012 the IRS informed representatives of the Committee that it had made a final adverse determination (the “Adverse Determination”) with respect to the issuance of the Favorable Private Letter Ruling, and that such Favorable Private Letter Ruling would not be forthcoming. As a result of the Adverse Determination, the Trust Administrator currently intends to maintain the Tax Holdback, but will reevaluate the Tax Holdback on a quarterly basis. For further information on the Adverse Determination and the Tax Holdback, please see the Current Report on Form 8-K filed by the Trust on May 11, 2012 in the Documents section of the website.

      • 3 Replies to stockpicker5
      • First, the Treasury forces the equity conversion onto the bond holders, THEN they follow up with taxing us on that undistributed equity.

        Either they distribute the equity and we pay taxes (or declare a loss) on the net proceeds of our initial bond purchase ... OR we don't pay taxes on the equity (GM shares and warrants) because they have already taken the taxes out before they were distributed.

        They shouldn't be able to tax us twice on the same transaction -- and that is exactly what it appears they are trying to do.

    • You are correct that a BK court can make final determination of what "wages" are. That wasn't the case in GM. The administration came in with the DIP (debtor in possession) financing. As a condition of the DIP financing, they insisted that the ordering of the creditors be changed to give the UAW VEBA much more than they otherwise would be entitled to. Because no 3rd party lender would match the favorable terms of the DIP financing or the timing, the court went along. No assertion was ever made that the UAW debt was wages. My beef is that the administration re-ordered long held prinicipals of debt to benefit their largest political contributor. As a unsecured debtor, I am outraged. If I was a secured creditor, as many low wage worker's retirement plans were, I would be beside myself!

    • I'm not playing the administration's game, but thank you for the mud slinging. I lost, quite literally, hundreds of thousands of dollars as a GM bond holder.

      The bankrputcy court has the final say in what constitutes "wages". Since the court and the buyer had the same employer, and the employer gets to changes the rules whenever they deem fit, the outcome did not surprise me. I was prepared for that possibility.

    • Unfortunately "dfwmcse" continues the administration's game of throwing up mis-imformation. While a certain percentage of compensation claims do have a priority in a BK, the UAW benefits where far beyond anything that would qualify for preferential treatment of compensation. In this case they were not even compensation claims. The UAW assumed responsibility for their own health care and formed a VEBA years before the BK. They took a combination of cash and UNSECURED GM notes as the initial funding. These UNSECURED debts were unprecedentially given priority to SECURED claims and other unsecured claims. My point was the market is screaming distrust of what the adminstration will do with the UAW and GM. Thank you for making my point stronger with your comments on the general market being up and GM not participating.

    • I agree with you on this point. When you look at all the bailouts, I believe that bondholders of only three companies took hits, GM, Chrysler and Lehman. I think even GMAC bondholders were not hit.

    • *I hate not being able to edit a misworded sentence

      "What would have been a routing debt refinancing process for GM because an impossibility ..."

      should read

      "What would have been a ROUTINE debt refinancing process for GM BECAME and impossibility ..."

    • The only reason Ford itself did not need a direct bailout was because they had just refinanced all of their massive debt immediately prior to the banking collapse. Ford mortgaged everything -- including their blue logo.

      What would have been a routing debt refinancing process for GM because an impossibility when the banks suddenly stopped lending money. Ford was lucky in their refinance timing, nothing more.

      I still do not believe that GM "had to go through bankruptcy" when they had an almost identical capital structure, debt load, labor cost, retiree obligations (etc) as Ford. Today, if you look at the amount of money that the treasury paid for GM, and count that as a debt obligation, the balance sheets of the two companies are strikingly similar.

    • Sorry, I don't agree with you that taking out a loan to keep credit flowing is a bailout. By that measure, every bank that has used the discount window by your definition was bailed out by the federal government.

      See:

      http://blogs.cars.com/kickingtires/2010/12/report-ford-took-federal-funds-too.html

      However I do agree that Ford has more debt, because they didn't screw their bondholders.

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