GM has announced they will repay the remaing 4.7B in loans from the the US.

1. Where is the money coming from? They announced a loss of 4.3 B for the 4th Qtr. It's not coming from profits, it seems.

2. They will still owe $45.3 B to the US. Is this the money used by the US to purchase 61% of GM. Is it to be repaid by buying back the stock?

Some of you guys are a lot more knowledgable about 10-figure finance than I am. Any explanation would be appreciated.

The bail-out was in a variety of forms... Loans, guarantees, stock swaps and capital infusion via stock purchases. You can lose money and still pay off debts. The money they still owe us will be repaid by selling the stock... if it sells for that much (or more). Losing $$ doesn't help that

(04-21-2010 08:41 PM)Hambone10 Wrote:  You can lose money and still pay off debts.

Been doing it for years. Before long, I will have lost enough to be debt-free.

Seriously, now, I know that mega-finance is not like my household budget, but the money has to come from somewhere, even if it is just accounting tricks.

What would be the source(s) of the cash?

Sale of assets? Could be but if so, why didn't they sell them earlier and avoid the need to borrow? I don't mean the fire sale, the-rent-is-due-tomorrow kind of sale, but unloading less productive assets as part of a cash flow plan.

Other borrowings? Are they paying the bailout with funds from another bailout? Did they borrow the cash from someone else, keeping total debt at about the same level but creating a marketing opportunity?

Did they just borrow more than they needed and are returning the excess?

I'm just wondering where the $$ came from.

(04-21-2010 08:41 PM)Hambone10 Wrote:  The money they still owe us will be repaid by selling the stock... if it sells for that much (or more). Losing $$ doesn't help that

If I understand this correctly, the US is expected to recoup their investment by selling the stock they own. The investment risk is borne by the US, so there is potential for profit as well as for loss. So basically GM owes nothing to the US, anymore than it owes money to me if I have 100 shares. We are speculating, me and the government. This doesn't sound right, so where do I have it wrong?

(04-22-2010 01:15 AM)OptimisticOwl Wrote:  

(04-21-2010 08:41 PM)Hambone10 Wrote:  You can lose money and still pay off debts.

Been doing it for years. Before long, I will have lost enough to be debt-free.

Seriously, now, I know that mega-finance is not like my household budget, but the money has to come from somewhere, even if it is just accounting tricks.

What would be the source(s) of the cash?

Sale of assets? Could be but if so, why didn't they sell them earlier and avoid the need to borrow? I don't mean the fire sale, the-rent-is-due-tomorrow kind of sale, but unloading less productive assets as part of a cash flow plan.

Other borrowings? Are they paying the bailout with funds from another bailout? Did they borrow the cash from someone else, keeping total debt at about the same level but creating a marketing opportunity?

Did they just borrow more than they needed and are returning the excess?

I'm just wondering where the $$ came from.

The biggest reason for the government loans was that they were cut off from their traditional sources of funds like commercial paper. It is "runs on liquidity" like this that cause most collapses. By securing the loans and more importantly, the capital influx, they were able to resume their commercial paper borrowings. I haven't looked directly at a spreadsheet, but i suspect this is true. I don't remember them floating a bond issue.

(04-22-2010 01:22 AM)OptimisticOwl Wrote:  

(04-21-2010 08:41 PM)Hambone10 Wrote:  The money they still owe us will be repaid by selling the stock... if it sells for that much (or more). Losing $$ doesn't help that

If I understand this correctly, the US is expected to recoup their investment by selling the stock they own. The investment risk is borne by the US, so there is potential for profit as well as for loss. So basically GM owes nothing to the US, anymore than it owes money to me if I have 100 shares. We are speculating, me and the government. This doesn't sound right, so where do I have it wrong?

I think you're right. I'm sure its designers would say that you are participating in the recovery rather than saying you gave a bail-out to investors... but yes...

There's a report now that it's being repaid with... TARP money.

Haven't been able to verify this, but if true, isn't that nice, out of one pocket and into the other.

(04-22-2010 01:24 PM)Hambone10 Wrote:  I don't remember them floating a bond issue.

Considering the bondholders (who held a secured and a priority position relative to anyone else) were wiped out to pay the union creditors (who had a lesser priority), I doubt very seriously you will see GM bond issuances at anytime in the near to medium term future (at least under an Obama administration).

http://reason.com/blog/2010/04/23/gm-pay...ans-withta

Quote:The bottom line seems to be that the TARP loans were "repaid" with other TARP funds in a Treasury escrow account. The TARP loans were not repaid from money GM is earning selling cars, as GM and the Administration have claimed in their speeches, press releases and television commercials. When these criticisms were put to GM’s Vice Chairman Stephen Girsky in a television interview yesterday, he admitted that the criticisms were valid:

Question: Are you just paying the government back with government money?

Mr. Girsky: Well listen, that is in effect true, but a year ago nobody thought we’d be able to pay this back.

Girsky, you magnificent bastard! If you managed to say that line without laughing, you deserve all the unsold Pontiacs in North America.