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Subject:  Re: GMAC Date:  3/9/2006  5:18 PM
Author:  markr33 Number:  15748 of 37163

<<How, then, do they make it "unavailable to pay the bondholders"?>>

If GM splits GMAC and sells part of it, and the remaining part doesn't have enough income to service its debts, then mini-GMAC will default and be unable to pay its bondholders. The assets of mini-GMAC will be distributed to the bondholders but this represents less than their invested capital. Meanwhile the rest of GMAC's assets are in GM's bank account.

This would be a "rational" thing for GM to do if they determined that part of GMAC has a negative value. I would think though that the GMAC bondholders would get up in arms over any sale/spinoff plan that increases the chance of GMAC bankrupcy.

First of all, I was asking how GM itself (the parent) could go bankrupt while shielding the assets (or cash from the sale) of GMAC.

And it certainly should be illegal to split up a company and place the obligation of all the bonds in one half with the prime assets in the other half and then allow the weak half with all the bonds to default!
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