more a financial question but can someone explain why?

"The board will now meet to discuss its "next steps" after a large number of investors refused to exchange their debt for company shares."

Im not very good at finances but I dont understand the reasoning behind...

surely if they let GM die they wont get their money back?

[Edited on 27/5/09 by Rek]

Didn't stop people doing it to Rover.

Brinkmanship - they're hoping someone like Lord Liar will step in and prop up the UK end i.e. Vauxhall and the same in Germany or that Fiat will up their offer.
Essentially since it's a dead duck they've got nothing to lose that's not already in danger.
Cheers, Pewe

PS Nick (see below V) is right about the Pension and Healthcare aspect of major companies & institutions and we'll likely see more and more go bust as they can't service these liabilties driving them to insolvency. Doubt however that Public sector employees, including your local MP will suffer though!
Oh and by the way a certain G Brown imposed a windfall tax on Pension Funds whilst Chancellor leaving a lot of them short for the future.
PPS Don't get me started!!!

[Edited on 27/5/09 by pewe]

If they own debt, they might get some money back if/when the company's assets are liquidated, if they own stock they will get bugger all.

Refusing to enter into a debt buy-back is huge vote of no confidence by the market, investors basically think that GM is stuffed, even with the bailouts, and they will be left to pick over the liquidated assets (of which most will end up going to GM pensioners)

The mistake people make is to think of GM, Chrysler and Ford as auto companies, really they are huge pension and healthcare companies that are trying to finance themselves by selling cars

Nick

If GM go Bankrupt and sell off their assets, then under law the shareholders have first dibs, after the govt of course.

This may be a less risky route to take.

quote:

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Originally posted by nstrug
The mistake people make is to think of GM, Chrysler and Ford as auto companies, really they are huge pension and healthcare companies that are trying to finance themselves by selling cars

Nick

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The U.S. Govt. has interfered in the normal bankruptcy procedures to create an "American Leyland".

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Obama is the "villain" because he prevented the legal bankruptcy procedures in order to create
(to the severe detriment of the company's bond and stock holders) two union/government-owned automakers.

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quote:

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Originally posted by zilspeed

quote:

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Originally posted by nstrug
The mistake people make is to think of GM, Chrysler and Ford as auto companies, really they are huge pension and healthcare companies that are trying to finance themselves by selling cars

Nick

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That's exactly the description which I heard used recently to describe BT. A pension fund that does telecoms on the side.

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