Comments on: The NRE guide to the GM IPO

By: steveegg

steveegg — Thu, 18 Nov 2010 17:00:03 +0000

In reply to Mark.

Oh, THOSE bonds. You were left out of this IPO entirely; Motors Liquidation Company neither received nor offered for sale any of its shares.

Those bondholders will get, upon the final liquidation of MLC, the shares that are held by MLC. As of now, that is 150 million, with potentially as much as another 30 million “Adjustment Shares” depending on how much in unsecured claims there are against MLC. Those “Adjustment Shares” begin to be issued at the $35 billion mark, and hit the max of 30 million at the $43 billion mark.

Since it is almost certain that there won’t be any money to exercise either of MLC’s warrants to buy additional stock that would have brought their overall number of shares to 422,727,270, while it is likely there will be somewhere over $35 billion in unsecured claims against MLC (indeed, GM believes it will be at least $37 billion), it’s safe to assume that it would be a maximum of 180 million shares of GM that would be divided against $27 billion of bonds.

That would make the ratio $150 of bond face value per share of GM stock, which would mean you would have to had hoped for the stock to be worth $50/share when it was finally released to get the 33 cents on the dollar you got by dumping when you did.

By: Mark

Mark — Thu, 18 Nov 2010 15:57:34 +0000

In reply to steveegg.

I sold my old GM bonds 2 weeks ago for $.33 on the dollar. They stopped paying as of 1-1-2010. I wasn’t sure if I held onto them what I would get in the form of new gm stock. I figured I would take what I can and go play somewhere else. I was wondering if the Old bond holders were going to get any of the IPO?…if so what was the payout ratio….

By: steveegg

steveegg — Thu, 18 Nov 2010 15:37:47 +0000

In reply to Mark. Unless you happen to own one of the underwriters, work for the Treasury or the Canadian government holding company, or are a GM UAW retiree, you don't own new GM bonds. All the bonds from old GM are more worthless than the paper they're printed on.

By: Mark

Mark — Thu, 18 Nov 2010 15:29:20 +0000

if i own gm bonds now how much of the new gm stock will i get?

By: steveegg

steveegg — Thu, 18 Nov 2010 15:23:18 +0000

In reply to Mark.

Now that we have the final 4.75% Series B mandatory convertible junior preferred stock prospectus from Government Motors (via the SEC), we can answer those questions, as well as offer a correction on the amount of shares about to be on the market (which jumped to 87 million):

– The conversion on stock that is mandatorily-converted on December 1, 2013, is as follows:
– If the common stock price is under $33.00, 1 Series B preferred share will get 1.5152 common shares.
– If the common stock price is between $33.00 and $39.60, it will be the ratio of $50 (the initial Series B price) to the common stock price (or between 1.512 and 1.2626 common shares per Series B preferred share)
– If the common stock price is above $39.60, 1 Series B preferred share will get 1.2626 common shares.
– Early conversion will be at a ratio of 1.2626 common shares per Series B preferred share.
– The annual dividend is 4.75% on the liquidation value of $50 (or $2.375/share/year), payable on March 1, June 1, September 1, and December 1.
– The underwriters expect to have the preferred shares on the NYSE about November 23, 2010.

By: Mark

Mark — Thu, 18 Nov 2010 14:54:18 +0000

What is the conversion ratio of bonds to stock for the bondholders?