GM Has Its Dissident Bondholders, Too

Last Updated Jun 18, 2009 4:50 PM EDT

A group of smaller General Motors bondholders is trying to make itself heard in GM's bankruptcy case, arguing that the big, institutional bondholders that dominate an official committee of bondholders aren't representing the interests of small investors.

The group must be hoping it gets treated better than a group of dissident bondholders in the Chrysler bankruptcy case. Chrysler's dissident investors got run over when they objected to a deal agreed upon by major bondholders.

The GM group calls itself the "Unofficial Committee of Family & Dissident GM Bondholders." Over GM's objections, the group of dissident GM bondholders won a hearing scheduled for June 23, essentially to change the "Unofficial" part of the name to "Official." As an official committee, the group would have a role in planning GM's reporganization.

From a PR standpoint, the group picked a good, sympathetic name, especially the "Family" part. The group says it consists of about 1,500 GM bondholders who in many cases invested their pension funds and their life's savings in GM bonds at or near face value. The most these investors can now expect is cents on the dollar, if that.

The Chrysler group of dissident bondholders called themselves Chrysler's "non-TARP" lenders. That was also an inspired name, for people who understood the reference. The name of the Chrysler group played up the fact that Chrysler's big lenders were likely to be influenced by the fact that they had received bailout money from the Troubled Asset Relief Program.

The argument went that since the big institutions were literally in debt to the U.S. Treasury, they would be more likely to go along with a Chrysler restructuring that was brokered by the U.S. Treasury. Nevertheless, the Chrysler group dropped its official objection and disbanded, in the face of strong public criticism fueled by President Obama calling the dissident Chrysler bondholders "speculators."

GM argued in a separate court document filed today that the big bondholders are adequately representing the smaller bondholders. GM also says the smaller bondholders are largely motivated by a request for the court to force GM to pick up the tab for the dissident group's lawyers and accountants.