Winners and Losers in the GM Bankruptcy

GMHere is one of those trades that will set some people’s teeth to gnashing. A couple savy investor types made a bundle speculating on GM bonds and bank loans.

From Bloomberg:

Investors that bought General Motors Corp. loans and speculated on declines in its bonds may be in line for “one of the greatest payoffs in the history of long- short investing,” according to Citigroup Inc. analysts.

Firms that made this bet include BlueMountain Capital Management LLC, which bought pieces of GM loans and purchased derivatives linked to its unsecured debt that would pay out if the company defaulted, according to a letter the New York-based firm sent to investors last month.

BlueMountain’s bet that GM secured creditors would recover substantially more than bondholders was among the “biggest winners” of such trades in its Credit Alternatives Fund, according to the letter to investors dated May 14.

David Kaiyalethe, a spokesman for the New York-based firm, declined to comment.

Deutsche Bank AG also made the trade last year in its proprietary trading group then run by Boaz Weinstein, according to a person familiar with the matter. The Frankfurt-based bank still owns GM’s revolver, two people familiar with the position said last month. Deutsche Bank spokeswoman Michele Allison declined to comment.

It’s interesting that the winners don’t want to comment. Don’t stick your head out of the foxhole anymore than is necessary these days.

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About Tom Lindmark 401 Articles

I’m not sure that credentials mean much when it comes to writing about things but people seem to want to see them, so briefly here are mine. I have an undergraduate degree in economics from an undistinguished Midwestern university and masters in international business from an equally undistinguished Southwestern University. I spent a number of years working for large banks lending to lots of different industries. For the past few years, I’ve been engaged in real estate finance – primarily for commercial projects. Like a lot of other finance guys, I’m looking for a job at this point in time.

Given all of that, I suggest that you take what I write with the appropriate grain of salt. I try and figure out what’s behind the news but suspect that I’m often delusional. Nevertheless, I keep throwing things out there and occasionally it sticks. I do read the comments that readers leave and to the extent I can reply to them. I also reply to all emails so feel free to contact me if you want to discuss something at more length. Oh, I also have a very thick skin, so if you disagree feel free to say so.

Enjoy what I write and let me know when I’m off base – I probably won’t agree with you but don’t be shy.

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