Wednesday, November 4, 2009

So The Government Doesn't Even Get The Deal That I Get?

So The Government Doesn't Even Get The Deal That I Get?

Several years ago, I made a serious mistake: I bought $25,000 face value of 7.85% coupon bonds that I thought were Citigroup. They weren't. CIT, in spite of the name, isn't Citigroup. (I fear that my enthusiasm for the yield and bond rating may have overcome my usual caution.)

The Democrat-induced financial disaster threw CIT to the edge of bankruptcy--and now, they are offering bondholders the chance to exchange our very nice, high coupon bonds for bonds that (in my case), are worth about 70% of the face value of the old bonds--and we get a small amount of stock in CIT, as well. It's a disappointing result, but the first time that any bond that I have bought has actually reached such a poor condition.

But now I see that I may come out ahead of the federal government on this deal. David Freddoso tells us:
Black specifically faults Geithner for negotiating an arrangement in which CIT can repay its senior creditors 70 cents on the dollar in bankruptcy, but taxpayers are completely left out in the cold for their investment.
I am at least getting a little stock on this (assuming that the exchange deal goes through).

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