No Runny Eggs

The repository of one hard-boiled egg from the south suburbs of Milwaukee, Wisconsin (and the occassional guest-blogger). The ramblings within may or may not offend, shock and awe you, but they are what I (or my guest-bloggers) think.

Archive for May 28th, 2009

New bondholder plan from Government Motors

by @ 18:06. Tags:
Filed under Business, Politics - National.

Fox Business reports that, in the wake of the failed bonds-for-stock swap attempted by GM, they and their Treasury masters have made a second offer that cannot be refused. If and only if a sufficient number of bondholders agree to not oppose a federal/UAW takeover of GM in bankruptcy court by 5 pm Eastern Saturday, the Treasury will reward them and the current stockholders with an initial 10% stake in Government Motors and an pair of warrants to ultimately increase that stake to 25%. The US Treasury will begin with a 72.5% stake, and the UAW with a 17.5% stake, so those of you still holding GM stock will likely be wiped out entirely.

Fox Business also reports that currently, 20% of the bondholders have swallowed the pill whole. Quoting a group of bondholders that apparently are at least part of that 20%: “Since the initial offer was made on April 27th, circumstances have materially changed that make today’s offer more attractive.” Could that be related to the utter thrashing that Chrysler’s secured creditors have taken?

Summarizing from the SEC filing:

  • The transfer of assets from General Motors (“Old GM”) to Government Motors (“New GM”), which will not include the $27.2 billion in bonds or most of the unsecured claims, will happen under Section 363 of the bankrupcy code.
  • All but $8 billion of whatever funding the US Treasury, and possibly the Ontario and Canadian governments, has or will pour into both Old GM overall (including the $20 billion in TARP bailouts) and New GM in relation to the bankruptcy proceeding will never be paid back.
  • Related to that, it is anticipated that Debtor-In-Possession financing provide by the Treasury will be in excess of $50 billion.
  • In addition to the $8 billion in debt the New GM will owe to the federal government, they will owe the UAW’s VEBA $2.5 billion and “other debtors” (presumably the secured creditors) $6.5 billion.
  • In addition to the 72.5% common-stock stake that the Treasury will have, they will also receive $2.5 billion in perpetual prefered stock with a 9% dividend per annum (or $225 million per year). If the Canadians participate in the DIP financing, they will get a portion of this.
  • In addition to the 17.5% initial common-stock stake that the UAW’s VEBA will have, they will also receive $6.5 billion in perpetual prefered stock with a 9% dividend per annum (or $585 million per year). They will also receive a warrant to purchase an additional 2.5% (as of 12/31/2009) any time before 12/31/2015 at a cost of $1.875 billion.
  • If and only if a sufficient number of bondholders, unspecified in the filing, agree to not oppose this, “Old GM” will get a 10% common-stock stake in “New GM”. If that number is not reached, the Treasury will reduce or eliminate that stake, presumably with the percentages of Treasury and UAW ownership in New GM increasing accordingly to 80.6% Treasury and 19.4% UAW in the event of a outright elimination.
  • Again if and only if an unspecified number of bondholders agree to not oppose this, they will recieve a pair of warrants: one to purchase an additional 7.5% stake of New GM any time in the next 7 years for $1.125 billion and one to purchase an additional 7.5% stake any time in the next 10 years for $2.25 billion. Again, if that number is not reached, the Treasury will reduce or eliminate this program.

Revisions/extensions (6:31 pm 5/28/2009) – I might be missing something here, but there is nothing in the SEC Form 8-K linked to above that says that the bondholders themselves will get anything. The 10% initial stake in “New GM” and the pair of 7.5%-stake warrants in same go to the owners of “Old GM”.

Previously:
– GM shuts down the bondholder buyout plan
– As the wheels turn, automaker edition

Minnesota GOP leadership debate – tonight

by @ 17:03. Filed under Politics - Minnesota.

(H/T – Chief)

Sorry about the late notice, but the Minnesota Senate District 45 Republicans are hosting a debate between the candidates for Republican Party State Chair and Deputy State Chair tonight at 7 pm at Robbinsdale Armstrong High School (10635 36th Avenue N) in Plymouth. The quick details via Freedom Dogs:

– State Party Chair candidates Tony Sutton, Carrie Ruud and Dave Thompson will be debating during the Party Chair portion of the debate.
– State Deputy Chair candidates Dorothy Fleming (incumbent), Michael Brodkorb, and Robert Swinehart will be debating during the Deputy Chair portion of the debate.
– Ed Morrissey and Annette Meeks, founder of Freedom Foundation of Minnesota, will be moderating the event.

The public is invited to both the mixer at 6:30 and the debate at 7. There is a cost of $5.

Matt Abe of North Star Liberty will be live-blogging the debate.

If it moves, tax it, e-commerce edition

by @ 7:32. Filed under Business, Politics - National, Taxes.

(H/T – Allahpundit)

Brett Joshpe wrote on The American Spectator site how sales on the internet are about to become a lot more expensive. Let’s go through the Cliff’s Notes timeline:

– In 1992, the Supreme Court ruled in Quill v. North Dakota that a retailer must have a “physical presence” in a state in order for that state to require the retailer to collect and remit that state’s sales tax. Do note that does not prohibit states from demanding their pound (in the case of Wisconsin, 5%-5.85%) of flesh from the purchaser; indeed, most states do demand their cut.

– Because of mass disobedience of that mandate, last year, New York required any online retailer who so much has an affiliate advertiser in that state to collect and remit the New York sales tax. In plain English, if a site like overstock.com advertised on, say the New York Times’ site or A Blog for All, it would be forced to collect New York sales tax on purchases made by New York residents.

– In response to that, overstock.com terminated its affiliate relationships with close to 3,400 entities.

– Meanwhile, the tax-and-spend-and-tax-and-spend-and (you get the idea) folks are trying to shove through Congress, under the guise of “streamlined” sales tax, a requirement to make all online retailers collect all state/local sales taxes.

Back in the dawn of e-commerce, I was involved in a small e-commerce project. Even if somehow a standard list of items subject to a sales tax were created (a pipe dream because the T&S&T&S&T&Sers in places like Madison and Albany will always want to tax more items than those in other state capitals), the myriad of different rates, both at the state and local level, which tend to not remain constant, would be a nightmare to keep up with.

Twitter history contest from Rep. Issa

by @ 6:37. Filed under Economy, Politics - National.

Rep. Darrell Issa (R-CA) is running a “Twitter history” contest. The rules are simple – channel Alexander Hamilton and comment on what the Geithner Cabal is doing to the economy, using Hamilton’s own words (Issa suggests the Federalist Papers and Hamilton’s national bank plan of 1791 for starters). The contest does close at 5 pm Eastern.

Since I don’t want to appear to be better than I am, you’re going to have to reply directly to @DarrellIssa on Twitter instead of leaving your quotes here.

Get Ready!

by @ 5:13. Filed under Economy, Politics - National.

Bonds: Treasury prices fell, with the yield on the benchmark 10-year bond rising to 3.71% – it’s highest since mid-November. It stood at 3.51% late Tuesday. Treasury prices and yields move in opposite directions.

Revisions/extensions (6:49 am 5/28/2009, steveegg) – I presume Shoebox ran out of time to explain why a high yield/low price on Treasuries is not exactly a good thing, so you’re left with the economic understudy to do the explaining. The CNNMoney blurb actually does a fair job of at least touching on that:

– The appetite for short-term (specifically in this case, 5-year) notes represents a lessening demand for longer-term notes (which explains the nearly-failed auction of 30-year notes the other week).

– Mortgage rates are tied to the 10-year yield, and rising interest rates could stifle any “recovery” in the housing market.

– The record amounts of debt coming to market could overwhelm it. Indeed, the Federal Reserve already is soaking up a lot of Treasury securities because there just isn’t enough money out there to buy it all.

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