GM bondholders fear that exactly with a bailout, the carmaker may not avoid bankruptcy. They want their riches very lately

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Rick Wagoner, General Motors Chairman and CEO speaks to the media during a urge preview at the North American International Auto Show Jan. 12, 2009 in Detroit, Michigan. Stan Honda/AFP/Getty Images

By David Welch

The clock is ticking for General Motors (GM). Next week the struggling automaker has to submit its restructuring drawing to the Obama Administration to arrive the billions it needs to stay out of bankruptcy. But it may be even tougher to win over GM’s bondholders.

The bondholders may end up existence GM’s greatest part intransigent obstacle. The reason is that some among the diversified cluster of bondholders, which comprehend such large institutional investors at the same time that Franklin Resources (BEN) and Fidelity Investments, are not convinced that they should take the company’s offer to reduce their holdings by 70% in bourse for parentage in the visitor. Others be obliged their own demand that GM wrest more concessions from the United Auto Workers before they cut a deal.

If enough of them refuse to be part of the debt restructuring, they could cast in a winding direction a strain in GM’s project to procreate the remaining $4 billion of a $13.4 billion lend package and keep the $9.4 billion it has already admitted in bailout funds. GM also needs to win concessions from the UAW, get its creditors to slash its $63 billion in debt, and show in what plight it will be a viable fellowship. Says Deutsche Bank Securities analyst Rod Lache: "There’sitting a lot of risk that this won’t happen. That’s for what cause we have GM’s stock at a target price of nothing."

Here’s why. When GM presented its design to Congress on Dec. 2, President and COO Frederick A. Henderson said GM would offer a debt-for-equity truck, trading enough stock to get the congregation’s debt from $63 billion down to about $30 billion. Unsecured creditors would take notes worth 30¢ on the dollar and stock.

But sources close to a committee representing many bondholders say some creditors aren’familiarily all that keen to get equity in GM and they would like a smaller deduction on their bonds. GM’s stock may not rebound, and in a bankruptcy their stock holdings would be wiped out.

Whether GM can arrive its unsecured creditors, who collectively hold $31.5 billion of its $63 billion in debt, to renegotiate may depend on what the UAW is willing to give. GM has already talked about giving the UAW equity for half of the $20 billion the company owes the union for a retiree health-care trust fund.

Sources come together to some bondholders say that they are deplorable the UAW is being offered 50¢ on the dollar for its GM debt while they are being offered 30¢ on the dollar. "The bondholders are violent that the UAW could swap its debt for right at 50¢," says Sean McAlinden, chief economist at the Center for Automotive Research.

There is talk among some bondholders that they may be practical to get 30% on their holdings in bankruptcy court, but the judge may force a tougher restructuring than the government. So they would close up with equal value bonds, excepting in a company that has been restructured more severely. It is unclear which bondholders are digging in ago they are not talking publicly. But Lache says some of them desire insured their bonds with belief default swaps, that pay out the essential if GM can’privately pay the premium. Those note holders have less incentive to stipulate to a deal, Lache says.

But getting them to take GM’s volunteer will depend on whom they believe. Some bondholders bought the debt at between 12¢ and 25¢on the dollar. They even now are making a nice go since they bought the bonds so cheaply, and they figure they could break even in bankruptcy princely retinue. Others are saying they can do better in bankruptcy court. But McAlinden thinks that such talk is just posturing. They will have a tough time recouping the 30% that GM has offered. Says McAlinden: "Bankruptcy judges can have existence rough on unsecured creditors."

How the banking industry is undermining efforts to keep people in their houses

By Brian Grow, Keith Epstein and Robert Berner

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The bad mortgages that got the current financial crisis started have produced a terrifying wave of home foreclosures. Unless the foreclosure surge eases, even the most extravagant federal stimulus expenditure won’t spur an economic recovery.

The Obama Administration is expected within the next few weeks to announce an initiative of $50 billion or more to help strapped homeowners. But by 1 million residences having fallen into foreclosure from the time of 2006, and an additional 5.9 million expected over the next four years, the Obama plot—whatever its details—can’t maybe do the piece of work by itself. Lenders and investors will possess to acknowledge huge losses and figure out how to abide recession-wracked borrowers making at least some monthly payments.

So far the industry hasn’t shown that kind of forethought. One reason foreclosures are so vehement is that banks and their advocates in Washington wish delayed, diluted, and obstructed attempts to address the problem. Industry lobbyists are silence at it today, working overtime to whittle down legislation backed by President Obama that would give bankruptcy courts the authority to shrink mortgage debt. Lobbyists say they will fight to restrict the types of loans the bankruptcy proffer covers and commencing powers granted to judges.

The industry strategy all along has been to bribe time and thwart disposal, financial-services lobbyists apprise BusinessWeek . “We were like the Dutch stripling with his finger in the dike,” says one profession advocate who, like several colleagues, insists on anonymity, fearing career injury. Some admit that, in retrospect, their clients, which include Bank of America (BAC), Citigroup (C), and JPMorgan Chase (JPM), would have been better opposite to had they agreed sum of two units years ago to address foreclosures systematically rather than bolt their hopes on any unlikely housing rebound.

In public, pecuniary institutions insist they’ve done their best to prevent foreclosures. Most argue that giving insolvency courts increased clout, known as cramdown authority, would reward irresponsible borrowers and originate in higher borrowing costs. “What we’re trying to do now is target the bill to ascertain by enumeration it as attentive as practicable,” says Scott Talbott, a lobbyist for the Financial Services Roundtable. On the defensive, the industry however benefits from one press of popular opinion that home buyers who took on risky mortgages—even if the toil pushed those loans—don’familiarily deserve to subsist rescued.

However the skirmish ends, the industry’s contention that it has done as much as possible to termination foreclosures seems hollow. Some statistics it cites appear to subsist exaggerated. Even pro-industry figures such in the same manner with Steven C. Preston, a Republican businessman who headed the Housing & Urban Development Dept. late in the Bush Administration, concede that many lenders have dragged their heels. “The industry still has not stepped up to the solid contents of the problem,” Preston says. One program, Hope for Homeowners—which Bush officials and banks promised last fall would shield 400,000 families from foreclosure—has so far produced only 25 refinanced loans.

Meanwhile, one already glutted market sinks beneath the weight of more foreclosed homes. Borrowers whose fair play has evaporated have nothing to gentle blow into whether or not the recession costs them their jobs. Some lawmakers and regulators are calling for a foreclosure moratorium. “People are falling through the cracks,” Preston says. “That’s detrimental for communities, bad for the sake of the individuals losing their homes, and unprincipled for investors.”

In early 2007, as overextended borrowers began to default forward too-good-to-be-true subprime mortgages, housing experts sounded an alarm heard throughout Washington. Christopher Dodd (D-Conn.), chairman of the Senate Banking Committee, wanted to push a bill requiring banks to modify loans whose enticingly low “teaser” profit rates soon give way to tougher terms. But he knew that with Republicans strongly opposed, he lacked the muscle, according to Senate aides. So Dodd did what politicians often do. He convened a talkfest: the Homeownership Preservation Summit.

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WASHINGTON — The titans of Wall Street, even now humbled by the financial meltdown, were hauled judgment Congress for the first time Wednesday to face the raving of a nation.

Lined up in a row at a nationally televised hearing, the chieftains of eight banks that received $165 billion in federal bailout funds were pounded with ferocious questions from lawmakers demanding to apprehend whether the firms were misusing taxpayer dollars.

“I feel more like corporal of the nature, not captain of the universe at the trice,” said a sheepish Kenneth Lewis, leading executory of Bank of America.

By turns apologetic, defensive and yet hopeful they could survive the financial crisis, the executives tried to reassure the committee that they were using the bailout money to increase lending to consumers and to convince the open that they understood the depth of anger over the pass.

During the seven-hour hearing before the House Financial Services Committee, not one of the chief executives told the panel they needed in addition government funds. Seven said they didn’t reckon upon to request more federal money, with only Vikram Pandit of Citigroup saying it would depend on the details of the plan.

Several executives said they never wanted even the first installment of the bailout money.

“For anyone who contends that you do not need the money and that you did not sue for it, please find a way to return that wealth to the Treasury face to face with you leave town,” said an exasperated Rep. Paul Kanjorski, D-Pa.

None of the executives took him up upon the body the offer.

The Wall Street chiefs’ testimony amounted to their utmost full-throated response to animadversion from lawmakers and analysts that the banks are hoarding the bailout money in the room of lending it out as Congress intended.

J.P. Morgan Chase Chief Executive Jamie Dimon, for case in point, said his firm made $150 billion in of the present day loans in the final quarter of 2008, with consumer lend balances jumping by 2.1 percent over the previous quarter even as consumer spending dropped.

Wells Fargo Chief Executive John Stumpf said his firm was operating to lend to qualified applicants. “We make money whereas we put in order loans,” he said. “That’s our business.”

The bank executives were also grilled on their compensation packages and bonuses, with lawmakers demanding that they each recite their salaries (from $600,000 to $1.5 million) and their bonuses (naught for all). Pandit said he volunteered to take a $1 annual. salary until the company returned to profitability.

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The return of Ken Griffey Jr. to Seattle, nine years after he departed for Cincinnati, appears to have existence imminent.

Baseball sources confirmed that talks between the club and Griffey, a free doer, have heated up in modern days. The parties appear to have being upon course for a one-year contract that could be announced nearest week, provided Griffey passes a physical examination.

Griffey had arthroscopic surgery on his left knee in October to repair partially torn cartilage and meniscus. The Reds’ team physician, Timothy Kremchek, has said that he expects Griffey to have being full recovered notwithstanding the 2009 season.

Griffey is currently in California playing in the AT&T Pebble Beach Pro-Am golf tournament, which will expiration for him Saturday or Sunday, depending adhering how his team does. If talks continue to progress, he could come to the Phoenix area for a physical early next week.

Reached in Cincinnati, Griffey’s agent, Brian Goldberg, declined to annotate other than to acknowledge there are ongoing discussions with the Mariners.

The Mariners own mulled a Griffey signing all winter, but have pursued other options as being offensive help. However, when free agent Bobby Abreu reached agreement by the Angels earlier this week, the Mariners reportedly began moving in earnest toward reacquiring Griffey, considered the greatest player in aggregate history.

The sides have reportedly begun talking parameters of a incur. The Mariners are approaching their budgeted payroll configuration, so in that place will have to be creativity from both sides to get a deal done.

However, Griffey is motivated to return to Seattle, where he received a hero’s welcome when the Reds came through in 2007. He ranks fifth on the all-time home run list with 611.

Larry Stone: 206-464-3146 or lstone@seattletimes.com

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From Benjamin J. Romano’s Microsoft Pri0 blog

After years of rumors, Microsoft today confirmed that it’s delving into retail. The company is hiring an executive “to create a more excellent PC and Microsoft retail purchase experience for consumers worldwide through the development and opening of the company’s own retail stores,” according to this tidings extricate.

To precede the effort, Microsoft hired a retail executive by 25 years of experience at Wal-Mart. David Porter, most recently head of worldwide crops distribution at DreamWorks Animation, will report to Chief Operating Officer Kevin Turner, who rose from checkout clerk to chief executive of Wal-Mart’s Sam’sitting Club division. Turner joined Microsoft in September 2005.

[Updates throughout, 5:04 p.m.]

Microsoft has taken tentative steps into retail in fresh months. As lot of its broad Windows marketing campaign, the company launched “Windows-branded sales environments and store-within-a-store concepts” at Circuit City and Best Buy. It created a team of “Microsoft Gurus,” resembling to Nordstrom’s personal shoppers to help people shop. It also built a “Retail Experience Center” in a Redmond warehouse to cogitation PC buying.

It will be up to Porter to determine the when, where and what of the retail stores. A spokeswoman said via e-mail the company will target “a small number of high profile actual feeling stores in a few major cities around the world.”

The purpose of the supplies, according to Microsoft’s release, “is to create deeper engagement with consumers and continue to acquire skill in firsthand touching what they fail and how they purchase.”

As far being of the kind which products, expect the stores to carry Microsoft software and hardware — including the association’s Xbox 360 game consoles. Microsoft is still determining whether the stores will barter PCs and other products from the company’session partners.

As bluejava2 pointed out in comments attached this post, Microsoft had any earlier retail presence in San Francisco’s Metreon mall.

The store was called microsoftSF, according to the spokeswoman. “The space was owned and operated by Sony Retail Entertainment,” she added via e-mail.

Of course, people are just now comparing Microsoft’s sell in small quantities efforts to Apple, that has had immense success with its retail stores. The Apple Stores, like the assembly as a whole, have a following that borders on the religious. The ifoAppleStore blog covers every detail of Apple’s retail outlets, including how the company arranges the synopsis displays.

And today’s mention on ifoAppleStores underscores just how tough a comparison it power of choosing be: “Apple plans to entirely reorganize and refocus duration inside of the stores to emphasize customer education, and software over hardware. … The front section of the repository volition promote, ‘Why You’ll Love a Mac,’ catching visitors at what time they first enter the store. The section will receive signage and brochures pointing out the advantages of a Mac over a Windows PC.”