The Chapter 11 proceedings of General Motors Corp. has hit a speed bump with bondholders -- but not from the hedge funds or pension funds that hold millions of dollars in its bonds. Instead the bankrupt carmaker faces off against a Connecticut accounting professor and his wife who hold $400,000 of GM's bonds, the value of which would be mostly wiped out in a restructuring that would give bondholders only 10% of the new company.
According to
Reuters:
In court papers prepared without the help of a lawyer, Radha Ramana Murty Narumanchi and Radha Bhavatarini Devi Narumanchi of New Haven, Connecticut, said they were among the "voiceless and defenseless casualties and victims" being hurt by GM's plan to sell itself to the government. The couple estimated about 210,000 U.S. households that hold GM debt could "lose their shirts" in the GM bankruptcy.
GM had been doing a good job of
neutralizing dissident bondholder groups until May, when the Main Street Bondholders Coalition, which advocates for the rights of GM's thousands of small bondholders, rejected the company's restructuring plan and began pressing Congress to get involved on behalf of individual investors. Additionally an
unofficial committee calling themselves "family and dissident GM bondholders" on June 11 sought designation as a formal committee, arguing in a court filing that "there are significant questions about the economic realities" of GM's bankruptcy plan.
The Narumanchi lawsuit could be a thorny problem for GM. It puts a human face to the otherwise abstract issue of bondholders losing so much value. And, with so many other parties on board with the restructuring plan, changing the plan for this one group could throw the whole process off course. -
George White See Reuters storySee Dealscape post on dissident bondholdersSee Dealscape post on GM's large bondholders
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