Word: haircut
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...This piece of the transaction has proved most controversial - and is perhaps the biggest potential obstacle to a smooth reorganization of GM. The problem: the VEBA's haircut - trading promised cash for riskier shares - is less severe than the deal offered to some bondholders. And that's not the way bankruptcy is normally done...
...Democratic Administration, whose party receives millions from the UAW each election cycle, giving a sweeter deal to the union than was offered them. Task-force members counter that other unsecured claims have received even better deals than the union's. Warranties, for example, have been 100% guaranteed - no haircut at all. "We're trying to avoid liquidation, and so these claims have to be classified according to their importance to the future viability of the company," a task-force official explained. "Obviously you can't sell cars without warranties. You can't make cars without suppliers. So most of those...
...income - but that only covered first mortgages. This seriously alarmed some investors in mortgage-related securities, since many second mortgages are owned by the same companies that service the loans. The companies were essentially getting paid to trim the amount owed to outside investors while not necessarily taking a haircut themselves...
...December, FedEx announced that its senior executives would earn 7.5% to 10% less, while its U.S.-based salaried workers would take a 5% haircut - affecting 36,000 people. "But even these measures," CEO Fred Smith said in a message to employees, "may not be enough to offset the rapidly deteriorating economy that has hit our industry so hard." In early April, the company let go of 1,000 employees...
...want to take government loans because they won't be able to gorge on their usual bonuses. "The plan to buy up toxic assets is going to evolve very slowly, if at all," an investment banker told me. "The banks don't want to take the haircut, and the hedge-fund managers" - who would partner with the government to buy the assets - "are afraid that if they start making big money on this, Congress is going to whack them the way it did on the AIG bonuses. If this plan doesn't work, it's going to take a much...