Megan McArdle outlines some of the latest terms of a GM creditor settlment. The interesting facts for me were:
- Creditors get 10% of equity in exchange for $27 billion in concessions ($2.7B per percentage point)
- Employees get 39% of equity in exchange for $10 billion in concessions ($0.26B per percentage point)
McArdle argues that there are good reasons bankruptcy courts tend to give labor a good deal, and having argued all along to allow bankrupcy courts to sort this mess out following the usual rules, I am not going to reverse myself.
But is it really the case that, push come to shove, bondholders get a deal 10 times worse than employees? If this is the case, I am surprised people ever buy bonds in a company with a large employee retirement overhang.