In a conversation with The WSJ [sub]’s Paul Ingrassia, former Car Czar Steve “Chooch” Rattner did some “back-of-the-envelope calculation” to show why he believes the US taxpayers will see their $50b “investment” in GM recouped when The General goes public sometime in the next year.
Here’s how Rattner gets to his latest calculation: Bonds of GM’s bankruptcy estate – known as Motors Liquidation – are currently trading around 30 cents on the dollar, according to Thomson Reuters. Those bondholders were owed $27 billion.
As part of GM’s restructuring, those bondholders were promised a 10% stake in GM when it goes public. In very rough calculations, those bonds are currently valued at about $9 billion (because they currently trade at around 30 cents and were originally worth $27 billion).
Assuming that $9 billion represented 10% of GM if it went public now that would imply GM had a value of around $90 billion. The taxpayer’s stake: 60% of that $90 billion, or $54 billion — Rattner’s magic number.
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