Hi everybody,

I am just want to get a perspective of what is going on with the Chrysler and GM debt deals. This looks like a great place ask questions.

Can someone provide insight on what might happen to the unsecured bondholders if the secured bondholders only get 28 cents on the dollar?

Also, can someone give insight on what the deal for Chrysler might mean for the secured and unsecured debt holders of GM?

Thanks

Chrysler's bank debt is entirely different the GM's Bonds. GM will either have to go into chapter 11, no bond holders are going to tender for ~30% in stock when the unions and government are taking 50% cash 50% equity.

As far as I understand Chrysler doesn't have publicly traded debt, it's mostly unsecured bank loans/credit lines.

I hold some GM debt I bought for 21c and already collected 6c of interest. It's currently trading for 12c and it's really hard to evaluate GM's offer.

The short version is 225 shares per $1000 of face value. In the current share price that would be nearly 50c on the dollar, but with that offer comes a promise to issue more shares such that the government would get 50% stake and UAW another 40%, leaving 10% for the bond holders and 1% for the current shareholders.

To me the following trade seems like a no brainer:

Short the stock and use the proceeds to buy debt. If the exchange fails, chapter 11 will render the shares worthless and you got free money, if it succeeds the 225 shares you debt will fetch should be more than enough to cover the short position.

Toyota is worth $120B, where GM's current market cap is 1/100 of that, so you can argue that once GM comes clean it could eventually fetch a TM valuation hence the 1/100 split make sense in the long run.

Either way buying the debt for 12c seems like a good deal to me, so I'm not selling mine and waiting for a better price

lipko wrote:
To me the following trade seems like a no brainer:

Short the stock and use the proceeds to buy debt. If the exchange fails, chapter 11 will render the shares worthless and you got free money, if it succeeds the 225 shares you debt will fetch should be more than enough to cover the short position.

Good luck getting a borrow. I try every day to get a borrow, and I have been trying for months. There are no shares available to short.

I have a borrow. Last options expiration I just bought the slightly in the money puts right at expire time. I assume that should work for you. (My trade is an arb against the single stock futures in forward months looking for soon convergence.)

scriabinop23 wrote:I have a borrow. Last options expiration I just bought the slightly in the money puts right at expire time. I assume that should work for you. (My trade is an arb against the single stock futures in forward months looking for soon convergence.)

I can't short through assignment, actually, if you don't actually get a locate of shares then you are actually naked short... I wish I could, I try to get a locate on 50m shares everyday... I would be happy to be short against the bonds I own. I would try the puts but my ops manager would skin me alive and then buy me in...


EDIT: I might be able to get a borrow if I pushed my size up to 1mm and paid some crazy rate...