Local investor's life savings wiped out in bankruptcy

Michael Byrne, 81, worked long hours for decades in various businesses to raise his six children. He and his wife, Lucy, paid their bills and set money aside for retirement.

But his decision to put all his savings behind General Motors appears nearly to have wiped him out financially, and he's joined with other small GM investors in a suit to recoup more of their losses.

Byrnes said that, like most investors, he saw bonds as a conservative investment when he decided about five years ago to supplement his Social Security with a $270,000 investment in GM securities.

He and his wife were living off the interest of about 9 percent at the Prospect Heights home they've maintained for 28 years.

"It was better than a savings account at the bank," Byrne said in an interview Thursday.

But GM's bankruptcy this week changed all that. Now, under the company's proposal to swap $27 billion in debt for stock in a restructured GM, the total value of his investment could plunge to below $10,000.

"That's all our life savings. I depend on that interest to live on. Now it will be gone," said Byrne, who owned small businesses to support his family. In the '60s, he operated a dry cleaners, then later a tax business and he sold water purification systems.

Byrne and the other small bondholders feel betrayed and battered. They say bonds are popular conservative investments often purchased individually, or through mutual funds and pensions, by the elderly or families saving to send kids to college.

"We felt it was a sound investment at the time," he said.

A debt-for-stock offer calls for bondholders to exchange their unsecured bonds for a 10 percent stake in a newly restructured company and warrants to purchase a greater share of the new GM at a later date, said GM spokeswoman Julie Gibson. If GM is worth $15 billion, the bondholders would get shares equal to roughly 7.5 percent of the common equity.

The agreement, which mainly large institutional bondholders agreed to, is expected to make the automaker's reorganization go more smoothly now that it's in bankruptcy protection, she said.

The individual investors like Byrnes, who call themselves GM Bondholders Unite, argue that they are being asked for disproportionate concessions compared mainly with the United Automakers Union, which is getting a 17 percent stake in the new company.

Thomas E. Lauria, the attorney who represented the rights of dissident bondholder in the Chrysler Chapter 11 filing, has agreed to work with GM Bondholders Unite in representing the thousands of individual GM bondholders who say they have been systematically excluded from the negotiating table.

Gibson said she has heard complaints from members of the grass roots organization, but added, "This (deal) is not an unusual way for something like this to play out."

For now, Byrne says he'll hope the lawsuit is successful. But he's not overly optimistic.

He blames the crisis on the government and the banks for giving mortgages to people who couldn't afford them. He doesn't point the finger at GM. He and his wife both drive Saturns.

"If the economy had kept up," he said, "they wouldn't have had problems selling cars."

But Byrne is angered by the way he has been treated by GM.

"I will never buy another General Motors car," he said. "But then again, I can't afford one now anyway."