THE BONDHOLDERS

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“Being portrayed as greedy is so off base it just doesn’t make any sense,” Mrs. Pryor said. “It isn’t greedy to ask for equal treatment.”

•••


Jim Modica
Occupation: Retired
Family: Wife and four sons
Amount invested in GM bonds: $700,000
Date of purchase: 2006
Percent of portfolio that were GM bonds at purchase: More than 90 percent
Percent of portfolio now: About 25 percent
Reason for purchase: The bonds were yielding 7.2 percent interest when the bank paid only 2 percent, and he trusted the company.
Reason for holding after downgraded to junk status in 2005: “I hoped for a turnaround.”
Original investment goal: Retirement income

Jim Modica feels guilty. In March 2006, he persuaded his brother, Mark, and two of his four sons to buy GM bonds.

Worse, he purchased $700,000 worth of the bonds.

“It all comes back on me,” said Mr. Modica, who is retired after working as a supervisor of employee contribution plans for, of all things, automotive companies. “I said they’d be safe.”

He saw the promise of a return of 7 percent annually and thought that would amount to profit without much risk. “I thought it was exactly what I needed,” he said.

Mr. Modica and wife, Margaret, 67, expected to live off the interest income from the bonds after he retired. That plan worked until this year, when Mr. Modica realized that the bonds were dropping in value rapidly.

“I bought these for income, not speculation,” Mr. Modica said. “I went long and held. I knew GM was trying to break the union’s hold, and [Rick Wagoner GM’s chief executive at the time] said their big losses were just ‘accounting losses.’ When you looked at GM, it made you think you’re in pretty safe waters.”

Mr. Modica said he doesn’t expect the stock he’ll receive in exchange for his bonds to be worth much, nor does he think the warrants allowing bondholders to purchase additional stock will provide him much value.

“Warrants — that’s a word I hate,” Mr. Modica said. “I just grit my teeth.”

•••


Bill Zastrow
Age: 58
Residence: Massachusetts
Occupation: Software executive
Family: Four children
Amount invested in GM bonds: $240,000
Date of purchase: 2005 before downgrade
Percent of portfolio that were GM bonds at purchase: 12 percent
Percent of portfolio now: N/A
Reason for purchase: GM was a large, profitable company with high-yielding bonds
Reason for holding after downgraded to junk status in 2005: Knew bondholders had strong claims in event of bankruptcy
Original investment goal: College savings

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