Interestingly enough, there might be still some room to invest in General Motors. Well, you might say that this is an insane investment after all, but after all the bondholders of GM might have a point after all.
And yes, we at doitinvest.com reffer to a potential investment in GM’s bonds.
GM has $1 billion in convertible debt coming due on June 1, which is close to the 60-day deadline set by the Obama administration for GM to resubmit its overall restructuring plan. GM has offered bondholders 8 cents on the dollar in cash, 16 cents on the dollar in new, unsecured debt; and a 90 percent stake in the automaker, said a second person with knowledge of the discussions, as quoted by Reuters. This means that the bondholders will become the primary shareholder of the automaker. They will also be entitled, under the new GM plan, to a fixed bond income, very simillar to the prefference shares used by the mainstream companies.
Now, if the investor believes in the future of GM and if the plan goes ahead, the bondholders might earn much more in the near future than the shareholders themselves. This is of course a very risky investment, since the bonds are rated CCC by Fitch and they might actually not paid at all if GM goes into the bankrupcy. But the promise of free ownership and a coupon payment is also something unusual. So what are your bets about this?
Coupon (%): 5.625
Maturity Date: 15-May-09
Yield to Maturity (%): 28.257
Current Yield (%): 5.777
Fitch Ratings: CCC
Coupon Payment Frequency: Semi-Annual
First Coupon Date: 15-Nov-04
Quantity Available: 500
Minimum Trade Qty: 1
Dated Date: 25-May-04
Settlement Date: 03-Apr-09