GM bondholders say 10% for their holdings is unfair
WARREN, Mich. -- In a couple of days, Chris Crowe will be in the crawl space of a home near Denver, inspecting the foundation and trying not to worry about his life savings.
Crowe, a retired electrician from Denver and part-time home inspector, tied up $13,000 in General Motors bonds a few years back as college savings for his son. He thought it was safer, surely, than putting money in stocks and safer than investing in a company that didn't have a long, respected history.
"It just doesn't seem fair," he said. "I understand there are only so many pieces of the pie, but they are just giving us crumbs."
On Wednesday, Crowe joined other individual bondholders at an event to ask for more say in GM's restructuring process. Individual bondholders are owed about $5 billion, just a slice of GM's total debt, but a big deal for small investors.
Marilyn Jegerlehner, a retired secretary from Monroe, Wis., relies on the monthly interest payments from the bonds she bought with her husband, Ralph, for expenses such as property tax and insurance payments.
They're already cutting back, preparing for the cutoff of the payments. The closest they come to eating out is sharing a $5 sandwich from Subway.
"We have played by the rules all of our lives, and we feel we are being ignored," she said. "We are calling on the administration to look out for us, too."
Richard Tilton, an analyst at Covenant Review and a bankruptcy attorney, said it's probably in the small bondholders' interest for GM to file for bankruptcy. A bankruptcy judge would have to put bondholders' interests ahead of other groups', including the Treasury.
"A lot of the people who bought bonds have a fondness for GM, and it's hard to accept that the company has failed," he said.
David Scott, a white-collar worker at a chemical company in Texas, stands to lose most of the $40,000 he has in GM bonds. He's warming to the idea that holding out and pushing GM into bankruptcy may result in a more equitable solution.
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