Monday, April 27, 2009

Quick Notes & Articles for the Day - April 27

Since the first few news items cover General Motors, I guess I could have called today Quick Notes on GM...

GM Wants to Swap Common Stock for Debt - GM said Monday it intends to offer $27 billion in common stock to its debt holders as part of a restructuring plan. According to the SEC filing, GM will offer 225 shares of common stock to each $1,000 of debt. The Detroit automaker values the offer at $27.2 billion, and has set a deadline for debt holders to respond by May 26. "Exchange offers are a vital component of GM's overall restructuring plan to achieve and sustain long-term viability and the successful consummation of the exchange offers will allow GM to restructure out of bankruptcy court," the company said in a statement.

GM May Close Pontiac Unit - GM sources have told The Wall Street Journal that they may close the Pontiac unit of GM after 82 years. The sources cited slumping sales and bottom line issues as the culprits.

GM Gets $2 Billion from Treasury - GM has received $2 billion in fresh working capital from the Treasury Department, officials said Friday. The government said last month that it would provide GM and Chrysler with working capital while rescue talks proceed.

Oil Falls 5% on Swine Flu Outbreak - Oil fell 5% ($2.50) on fears that the Swine Flu could have global implications on the economic recovery. As with previous outbreaks (SARS, Avian Flu), these are usually just knee jerk reactions and not based on actual evidence.

Thain Says He Was Not Alone in the Bonus Decision - John Thain, former CEO at Merrill Lynch, said Bank of America didn't tell the truth about its role in bonuses paid to Merrill employees as well as losses at the brokerage giant, The Wall Street Journal reported Monday. Thain, who said Bank of America CEO Ken Lewis asked him to resign, told the newspaper that he and Lewis agreed in writing the bonuses could be handed out before B. of A.'s acquisition of Merrill closed, which resulted in the early payments that have sparked a firestorm. "The suggestion Bank of America was not heavily involved in this process, and that I alone made these decisions, is simply not true," Thain told the Journal. **Note - I wonder if Thain has paid back the $1.22 million renovation for his unsuitable office when he became the CEO at Merrill Lynch.


The article below is just about a must read for anyone following the market. There have been questions as to why various banks now want to return TARP funds, and the story of Ken Lewis and Bank of America is a good place to start.

Busting Bank of America - The Wall Street Journal - "Treasury Secretary Paulson, who says he was acting at the direction of Federal Reserve Chairman Bernanke, told Mr. Lewis that the feds would fire him and his board if they didn't complete the (Merrill Lynch) deal. Mr. Paulson told Mr. Lewis that the government would provide cash from the Troubled Asset Relief Program (TARP) to help BofA swallow Merrill. But since the government didn't want to reveal this new federal investment until after the merger closed, Messrs. Paulson and Bernanke rejected Mr. Lewis's request to get their commitment in writing."

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