GM Bondholders Try to Salvage Investment

Retirees Moe and Joan Pryor bought $25,000 of General Motors bonds five years ago at a time when they figured the investment would be as sturdy as the Rock of Gibraltar.

Today, the former American corporate icon stands at the threshold of bankruptcy, and the Pryors' investment is on the verge of being wiped out.

"Never in our worst dreams did we think this would happen," said Joan, 77, a retired antiques dealer from Essex, Conn.

The Pryors and other small investors in GM have come to Washington this week to lobby for a better deal from the Obama administration's autos task force, which they say has run roughshod over their financial claims.

Under the restructuring deal being shaped by the task force, GM's bondholders are asked to trade their bonds for a small equity stake.

Many of the bondholders, which include large institutions and small investors, believe that their compensation in the deal is far too meager, particularly compared with the stake being given to the United Auto Workers' health plan.

"It's totally inequitable," Joan Pryor said.

Others believe that the government never should have rescued GM because they think the bondholders would have recovered more of their investments in a bankruptcy without government intervention.

"The government should get their hands out of it," said Chris Crowe, a retired electrician from Colorado who accumulated $115,000 in GM bonds over the years. "It's unconstitutional. The government is just coming in to take over the company."

The group meeting in Washington is being organized by the 60 Plus Association, a conservative seniors advocacy group.

Administration officials said they were seeking to restructure the company fairly and were meeting with bondholders last night.

"Absent government intervention, GM would have run out of money and shut down altogether," said an administration official who spoke on the condition of anonymity because of the sensitivity of the negotiations. "In making the decision to be the lender of last resort, the government took on the obligation to ensure that all parties are treated fairly."