Middle-class General Motors bondholders get a chance to vent

Small investors in GM bonds must feel like they're riding Vespas in the middle of the Daytona 500. Technically, they're in the race. Most likely, though, they will end up ignored or, worse, roadkill.

Still, you have to admire the quest for fairness to rally middle-class investors and retirees who chose to buy GM bonds in better times. That's when it was easier to believe the Detroit automaker was such a part of the American industrial fabric that it was sure to rebound — and certainly not go bankrupt. That's when people figured GM, like some of the nation's biggest banks, was too big to fail.

That will prove costly. As bankruptcy looms, GM bondholders on the verge of losing the vast majority of their stake are fighting for respect and better terms in any type of GM reorganization.

Today, a group of "main street" bondholders will gather in Tampa at 11 a.m. at the Dr. Blaise Alfano Conference Center, 11606 N McKinley Drive, to voice concerns about being unfairly left out of the bankruptcy negotiations.

One of those bondholders is Jim Graves, 58, a software developer from Celebration. His mother, now 80 and living in The Villages, Sumter County's mega-retirement community, worked at GM. She purchased $100,000 in company bonds, which she relies on for about a third of her retirement income. Graves looked at his mother's bonds when GM looked stronger and bought more than $100,000 for himself.

Of course, he regrets the investment. But he is more upset because GM bondholders are about to suffer the brunt of the hurt and cost in a GM reorganization demanded by the Obama administration.

"The government is stepping on the natural order of things and ignoring the rights of bondholders," Graves says. "It's stunningly unfair."

A fifth of GM's bondholders are individual investors. Most of the unsecured bonds, which have a face value of $29 billion, are worth less than 15 cents on the dollar — possibly far less. And some like Graves argue GM and the federal government offered a far better deal to the United Automobile Workers than to bondholders.

Bankruptcy protection for the nation's biggest automaker is becoming more probable with a government-imposed deadline to reorganize just over two weeks away, GM's top executive said Monday.

A sister bondholders rally is scheduled this morning in Philadelphia. These protests grew out of the original rally held in late April in Warren, Mich. — GM's heartland — in which individual bondholders from Colorado to Wisconsin stood up to protest their unfair treatment.

These protests, part of the so-called "Main Street bondholders" group, are put together by the 60 Plus Association in Alexandria, Va. Dubbed a conservative version of AARP, 60 Plus is a seniors advocacy group with a free market approach. It's run by ex-Marine James Martin, a University of Florida graduate, class of '62, who became a congressional staffer and lobbyist for conservative issues.

"We started hearing from seniors, and those soon to be, on the GM and Chrysler bond topic about a month ago," Martin says. "So we decided to provide a megaphone to those who do not feel they were provided proper attention."

I'm not sure many are listening at GM's late hour. But it's got to feel better to get this injustice off their chest.

Robert Trigaux can be reached at trigaux@sptimes.com.

Middle-class General Motors bondholders get a chance to vent 05/11/09 [Last modified: Tuesday, May 12, 2009 7:17am]

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