No Runny Eggs

I really should’ve done this last week, but I really need to walk through the numbers behind Government Motors. First, let’s review what went to General Motors before and during its bankruptcy:

• The US Treasury provided the following loan facilities to General Motors before and during bankruptcy – a total of $19.76 billion in unsecured and $30.1 billion in senior secured debt facilities ($22.58 billion used), or $49.86 billion offered ($42.34 billion used):
  • $13.4 billion on 12/31/2008
  • $2 billion on 4/22/2009
  • $4 billion on 5/20/2009
  • $0.36 billion for warranty obligations on 5/27/2009
  • $30.1 billion in Debtor-In-Possession facility during the bankruptcy, with only $22.6 billion ultimately used
• The Canadian and Ontario governments provided the following loan facilities to GM before and during bankruptcy:
  • $6.3 billion in unsecured loans at times unknown
  • $3.2 billion in DIP facility during the bankruptcy, with only $2.7 billion ultimately used

The entirety of the unsecured debt from all governments, except for the $0.36 billion warranty loan (repaid on June 10), as well as a significant portion of the DIP facility, was forgiven to seiz…er, credit bid for 73% of Government Motors (60.8% to the US, 11.7% to Canada). In addition, $1.175 billion of the DIP financing facility ($0.986 billion from the US, $0.189 billion from Canada) remained with Old GM, with first-right claims on the assets generated from its wind-down.

Meanwhile, only $8.9 billion of the DIP facility was tapped during the under-6-week bankruptcy. As mentioned before, $1.2 billion remained with Old GM, to be repaid with the proceeds from its wind-down. The other $7.7 billion of DIP financing used during the bankruptcy was also part of the credit-bid and forgiven outright. The US portion of that is approximately $6.98 billion.

That left $24.4 billion unused in the DIP facility ($22.11 bilion from the US) on July 9, the day before Government Motors assumed its present form. The Treasury and the Canadians could have taken all of that back, but they decided that their new business venture needed $16.4 billion in “seed money”, as well as some help in the creditworthiness department. They structured $8 billion ($6.71 billion from the US) as a “loan” to be immediately used by GM as it saw fit and to be “repaid” from part of the unused DIP facility, with the other $8.4 billion ($7.89 billion from the US) initially requiring Treasury approval to spend but eventually being under GM’s control. The remaining $8 billion of the DIP facility ($7.52 billion from the US) was effectively returned to the loaners (the Treasury and the Canadians) unused either during or after bankruptcy.

So, how far on the hook are we? Let’s review:

• $19.3 billion in pre-bankruptcy loans forgiven upon exit from bankruptcy
• $0.99 billion of DIP financing owed by Old GM (likely to be repaid only in part)
• $6.98 billion of DIP financing forgiven upon exit from bankruptcy
• $7.52 billion given to Government Motors upon exit from bankruptcy, originally in escrow and now theirs to spend as they see fit
• $6.71 billion “loaned” to Government Motors upon exit from bankruptcy and “repaid” with other government money

We’re still on the hook for about $42 billion. Meanwhile, the Canadians are still on the hook for about $9 billion. Who here thinks GM is worth $69 billion (the market capitalization required to make the Treasury whole)-$75 billion (the market capitalization required to make the Canadians whole)?

Revisions/extensions (11:53 pm 4/27/2010) – Two more plot twists:

• (H/T-Phineas) Forbes reports that Government Motors is using this sham of a “loan payback” to justify getting $10 billion from the Department of Energy to retool their plants. Of note, the “sham loan” carried a 7% interest rate, while the DOE loan carries a 5% interest rate.
• (H/T-Fausta) Fox Business found that, unless Government Motors comes up with $12.3 billion for its pension fund in the next 5 years (with Chrysler UAW Motors needing to come up with $3.4 billion) we’ll be on the hook for most of that shortfall. Fox News analyst James Farrell provides the following scenarios if we still have stakes in Government Motors and UAW Motors when the butchers’ bill comes due in 2014:
  

  *It can approve the payments to the pensions, which would benefit the union pension holders but reduce the likelihood that taxpayers will get their money back on the involuntary investment made in GM and Chrysler stock as well as taxpayers’ status as lenders to the automakers; OR

  *Decline to address the underfunding and let the plans get involuntarily terminated–costing union members approximately $23 billion in overall lost benefits ($18 billion for GM; $5 billion for Chrysler), and costing the PBGC (taxpayers) approximately $14.5 billion.

  “The only option where GAO sees taxpayers not getting the short end of the stick?” Farrell says. “Praying that the auto companies rapidly return to profitability and find $15.7 billion in excess cash lying around in the companies’ corporate couches between now and 2014.”

Revisions/extensions (5:59 pm 5/1/2010) – I did forget to factor in the value of the $2.10 billion of prefered stock the Treasury has in Government Motors, the 9% annual dividend it is due ($189 million per year, payable each quarter), and the fact that they’ll be holding onto that until at least the end of 2014 and until GM comes up with both the liquidation value ($25/share, or the full $2.10 billion if they get want to get rid of it all) and any unpaid dividend.

GM did pay out the first two scheduled distributions on September 15 and December 15, giving the Treasury just over $81 million. It is unknown at this point whether they paid out the March 15 distribution of just over $47 million. That leaves the minimum payback value of the Treasury’s prefered stock at $3.04 billion.

Also, related to that, the federal government (as well as the Canadians and the UAW VEBA, the other holders of the prefered stock) will hold that prefered stock until at least 12/31/2014, as part of the terms of the seizu…er, creation of Government Motors. It is only at that point when GM can buy out those prefered shares, for the aforementioned $25/share plus any unpaid dividend (at the aforementioned 9% per annum).