No Runny Eggs

TheTruthAboutCars.com found an interesting tidbit in the official TARP 2-year retrospective – $17 billion of the $80 $73 billion spent on General Motors/Government Motors, GMAC/Ally Bank, Chrysler/UAW Motors and the former Chrysler Financial will never be recovered. Let’s walk through the numbers, using the August 2010 monthly report to Congress and monthly interest/dividend report, and remembering the $6.71 billion “loan repayment” from Government Motors represented a writedown of TARP money promised to GM:

Net expenditures of $72.55 billion:

• $43.15 billion to GM (does not include the $6.71 billion “loan” that was “repaid” with unused DIP financing, which also came out of TARP)
• $12.26 billion to various entities using the Chrysler name (Old Chrysler, the former Chrysler Financial and UAW Motors – does not include $2.05 billion of available-yet-unused financing from the US Treasury)
• $17.14 billion to GMAC/Ally Financial

Net repayments of $4.09 billion:

• $0.36 billion from GM as payment for a loan for its warranty program (note; this does not include the $6.71 billion “repayment” made from unused DIP financing)
• $1.5 billion from former Chrysler Financial as full payment of loans made to it plus an additional $0.02 billion from Chrysler Financial for reasons unknown
• $1.9 billion from Cerebus (the former owner of Chrysler) to extinguish the remaining $3.5 billion Old Chrysler owed the Treasury and free the former Chrysler Financial from the lien placed on it.
• $0.03 billion in proceeds from the liquidation of Old Chrysler

Interest and dividend payments of $2.61 billion:

• $0.14 billion from pre-bankruptcy GM in interest payments
• $0.34 billion from Government Motors (New GM) in interest payments (it is impossible to separate the legitimate warranty loan repayment and earlier loan payments from the much-larger sham “loan repayment”
• $0.18 billion from New GM in dividend payments on preferred stock
• $0.01 billion from the former Chrysler Financial in interest payments
• $0.06 billion from Cerebus/Old Chrysler in interest payments
• $0.25 billion from UAW Motors in interest payments
• $1.63 billion from GMAC/Ally Financial in dividend payments on both preferred stock and trust preferred securities

That leaves somewhere around $65.85 billion in expenditures on Government/UAW Motors and their financing arms uncollected thus far. However, there’s still significant amounts of money the Treasury has claim to, and which the 2-year retrospective assumes will be repaid:

• $2.10 billion in preferred stock in New GM, which pays an annual 9% dividend (or $0.19 billion per year), which cannot be liquidated by GM until 12/31/2014 and until any outstanding dividend is repaid. That required dividend amount pushes the minimum preferred stock liquidation amount to $3.05 billion.
• $0.99 billion in loans still owed by Old GM, almost certainly not to be repaid anywhere near in full.
• $2.00 billion in loans to UAW Motors at a minimum 7% interest (or the 3-month LIBOR rate plus 5 percentage points if that’s higher), due at the end of 12/2011, and $3.09 billion in loans to UAW Motors at a minimum 9.91% interest (or the 3-month LIBOR rate plus 7.91 percentage points if that’s higher), due at the end of 6/2017. With a total of $2.55 billion in interest left if both loans go to maturity, that would bring the total amount due from UAW Motors to $7.64 billion.
• 228,750,000 Series F-2 Preferred shares in Ally Financial, which if Ally does not pay $11.43 billion plus any outstanding dividend (9% annual dividend, or $1.03 billion per year) to liquidate the preferred shares, will be converted to, at the present value, 988,200 common shares in Ally at the end of 2016. The dividend through the end of 2016 would net the Treasury $7.21 billion, at which point it will increase its holdings to a majority of authorized Ally common stock (it currently holds 450,121 shares, 56.3% of outstanding stock and 22.3% of authorized stock).
• Trust Preferred Securities in Ally Financial with a liquidation value of $2.67 billion plus any unpaid distributions, which carries an 8% annual distribution rate (or $0.21 billion per year) and is effectively a 30-year note.

Assuming the UAW Motors loans go to maturity and actually get paid back in full, Government Motors liquidates its preferred shares as soon as it can, Ally Financial manages to retire its Trust Preferred Securities at the end of 2011, and Ally decides that just-under-half its common stock is not worth $11.43 billion (likely because 51% of the company was bought by a consortium led by Cerebus for $7.4 billion in 2007), somewhere around $21 billion will come into the Treasury by the end of June 2017. That would leave $44.85 billion unpaid. Given the government assumes it’s still going to lose $17 billion, the sales of the 61% stake in Government Motors, 10% stake in UAW Motors, and 81% stake in Ally Financial together are expected to bring in somewhere less than $28 billion.