- The Washington Times - Monday, June 15, 2009

Click the name to view the vignette of each bondholder:

David Talbot
James Graves
Joan Pryor
Jim Modica
Bill Zastrow
William Nast
Kenton Boettcher
David Tuckerman

David Talbot
Age: 24
Residence: Bellingham, Wash.
Occupation: Student
Household income: $25,000
Family: Single
Amount invested in GM bonds: $5,000
Date of purchase: 1988
Percent of portfolio that were GM bonds at purchase: 100 percent
Percent of portfolio now: 100 percent
Reason for purchase: A gift from his grandfather
Reason for holding after downgraded to junk status in 2005: Wasn’t sure exactly how they worked
Original investment goal: College education

David Talbot’s grandfather bought GM bonds for him when he was 4 years old. The bonds were supposed to mature at $20,000 in 2012, and Mr. Talbot hoped to pay off his college loans with the proceeds.

But Mr. Talbot said he’s “pretty grumpy” about the prospects of making any profit. He said he would be lucky to get back the principal investment of $5,000.

Mr. Talbot blames the government and union involvement for weakening GM’s ability to compete. But in the end, it doesn’t matter who was to blame, he said. His nest egg has all but disappeared.

He would prefer that GM did not have to go into bankruptcy. His real worry is that the government is so deeply involved as a large owner of the firm. “I like the idea of GM sorting its own stuff out,” he said. “The more [the government] gets its hand mixed up in the pot, the more I expect to lose that investment.”

•••


James Graves
Family: Wife, two children and two grandchildren
Date of purchase: N/A
Percent of portfolio that were GM bonds at purchase: 33 percent
Percent of portfolio now: Negligible
Reason for purchase: “It was a trustworthy company.”
Reason for holding after downgraded to junk status in 2005: Thought GM was reliable
Original investment goal: Early retirement

Jim Graves was one of the many GM bondholders listening to a conference call in May about the impending bankruptcy. He was also one of many participants who ended the call in confusion.

“We’re supposed to write an e-mail to some anonymous address, saying we support the offer. It just felt like we were being strong-armed,” Mr. Graves said.

Mr. Graves said he would survive the GM downfall, but he’s upset by the way the situation was being handled.

“I’m glad the government stepped in,” he said. “I wish they could keep them out of bankruptcy, because Americans need those jobs. I just wish they would be fair about it.”

The sudden loss and confusing statements also are troubling Mr. Graves’ mother, Vivian Floyd, 80.

“She’s a wreck. She’s a person who puts a smiley face on everything, and she can’t put a smiley face on this one,” Mr. Graves said.

His mother invested $100,000 in GM in 2003 to provide for her retirement. Mr. Graves said her income will fall by a third.

“She’ll be OK, but she may have to give up her home and visit her grandchildren less,” Mr. Graves said.

Mr. Graves said he and his mother hoped that they would see a return in profits by holding on to their bonds, even as GM was falling.

“I don’t think any of the bondholders ever thought GM would collapse,” he said.

He said his mother is “looking for me to tell her what to do. I’m pretty smart, but I can’t tell her what anything means with this.”

•••


Joan Pryor
Family: Husband
Date of purchase: N/A
Percent of portfolio that were GM bonds at purchase: “A significant portion.”
Percent of portfolio now: N/A
Reason for purchase: Safe investment for a retirement income
Reason for holding after downgraded to junk status in 2005: Was told to wait it out
Original investment goal: Retirement income

Six years ago, Joan Pryor and her husband bought GM bonds for their retirement. Neither had a pension, and they felt they needed more retirement income than Social Security could provide.

“I’m worried, very worried. I have to figure out how to earn more income,” Mrs. Pryor said. “We’ve had to cut back on charitable donations, which is hard, and we don’t want to.”

Mrs. Pryor said she has had to shop for cheaper phone and cable TV arrangements.

“We’re not concerned with building a nest egg anymore,” she said. “We’re trying to use the nest egg to live on,” and that amount has been shrinking because of GM’s problems.

Mrs. Pryor said she thought bondholders held a privileged place among debtors during a bankruptcy. “A lot of people told us to hang on to the bonds,” she said.

She said the terms of this bankruptcy do not make her feel privileged at all, and she is no Wall Street titan.

“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

Bill Zastrow is chief executive of FileMark Corp., a Massachusetts software company. He is a single father of four children: an 18-year-old son who just finished his first year of college, a 17-year-old daughter who just graduated from high school and two preteens who live at home.

Mr. Zastrow has more than 30 years’ experience investing in bonds and purchased $240,000 of GM’s debt before they were declared “junk” bonds by Wall Street ratings agencies. He went in with his eyes open, he said. He thought he was limiting his risk by investing in bonds instead of stocks.

“I knew what I was doing, and I knew the risks,” Mr. Zastrow said. “I’d always been assured that in a bankruptcy, the bondholders come first.

“I thought about selling, but it was paying good interest and GM didn’t really get into trouble until just last year.”

The income went into a trust for his children’s education. Because of GM’s bankruptcy, the college money will have to come from his individual retirement account instead.

“They robbed me out of five years of work,” Mr. Zastrow said. “I will have to work another five years because of this development.”

•••


William Nast
Family: Wife and five children
Date of purchase: 2006
Percent of portfolio that were GM bonds at purchase: Less than 10 percent
Percent of portfolio now: Less than 10 percent
Reason for purchase: Low-risk investment
Reason for holding after downgraded to junk status in 2005: “I took my broker’s advice.”
Original investment goal: Retirement

Three years ago, William Nast bought GM bonds to fund his retirement and to “generate wealth” — as investment advisers like to say — so that he could pass on money to his five children.

Now those lofty words look empty. “My kids will suffer because they would have benefited from the bonds,” Mr. Nast said. “When dividing money up over five children, a decent amount doesn’t look like much anymore.”

Mr. Nast, who considered his investment conservative, said the bondholders he knows were making investments for similarly altruistic reasons.

“Most people wanted some retirement money or money to leave their children,” he said. “But the media is painting us out to be greedy and rich.”

When Mr. Nast purchased the bonds in 2006, analysts were worrying about GM’s inefficiencies and underfunded pension plans. But Mr. Nast took his broker’s advice and bought the bonds anyway.

“He told me at the time that GM would never go broke,” Mr. Nast said.

Still, Mr. Nast considers himself lucky: At least he kept his investment relatively small. “There are a lot of people worse off than we are,” he said.

Mr. Nast said he’s especially disappointed by the way “the ever-growing government” has handled the situation.

“When you have an American free-market company like GM being taken over by the government, it reminds me of a dictatorship,” he said. “The truth is, Obama knows the individual bondholders weren’t the ones who got him elected, so we’re not a priority.”

Then again, he said, blaming the president does not make much sense. “It would be the same no matter who’s in office,” he said.

•••


Kenton Boettcher
Age: 54
Residence: Lake Forest, Calif.
Occupation: Real estate consultant
Household income: Middle class
Amount invested in GM bonds: $100,000
Date of purchase: 2005
Percent of portfolio that were GM bonds at purchase: About 10 percent
Percent of portfolio now: N/A
Reason for purchase: “I was looking for a reliable investment.”
Reason for holding after downgraded to junk status in 2005: “GM was a solid company, and thought my position as a bondholder would be secure even if they did go bankrupt.”
Original investment goal: Retirement

Kenton Boettcher is a real estate consultant who specializes in commercial and large residential projects. He cared for his father and brother before their deaths in 2001 and 2007. His brother had muscular dystrophy.

Mr. Boettcher said he has always kept a close eye on the future. Apart from his IRA, 401(k) and a health savings account, Mr. Boettcher put $100,000 into GM bonds. Although the GM crisis will not put him on the street, he said, he knows he’ll see a dent in his retirement plans.

“Fortunately, I don’t have a lifestyle of the rich and famous,” Mr. Boettcher said. “But as far as my retirement hopes and dreams, [the bankruptcy] will impact those.”

Mr. Boettcher bought GM bonds in 2005, even though they had taken a turn for the worse. He was looking for a reliable investment that did not fluctuate like stocks and had a life span that would carry him through retirement. He weighed the risk of bankruptcy against the fact that GM had been a reliable investment for 100 years, and that his position as a bondholder, he thought, would be secure according to the laws that were in place.

“I felt that [being in a position with the secured bondholders] was a safety net,” he said.

Mr. Boettcher is concerned about the emotional effects of the investment losses on investors who have no cushion. As for himself, he said, he’ll survive just fine.

“My planning always has been to provide for my own retirement, so I started planning my retirement over 30 years ago when I started my career. I was responsible for me, and no one else should bear my burden,” Mr. Boettcher said.

•••


David Tuckerman
Age: 84
Residence: Arlington
Family: Four children, 15 grandchildren, 14 great-grandchildren
Amount of GM bonds invested: $20,000
Date of purchase: 2003
Percent of portfolio that were GM bonds at purchase: 7 percent
Percent of portfolio now: Less than 1 percent
Reason for purchase: A son and a financial adviser managed his portfolio.
Reason for holding after downgraded to junk status in 2005: Income
Original investment goal: Money for assisted-living care for himself and wife, Betty, who had Alzheimer’s disease.

Of all the Alzheimer’s patients at the Brighton Gardens assisted-living facility in Arlington, Betty Tuckerman was the only one whose healthy spouse came to live with her.

“I took care of her,” said David Tuckerman, 84. Mrs. Tuckerman died last year, but Mr. Tuckerman continues the couple’s long-standing tradition by reading to students at Randolph Elementary School.

Six years ago, when his adviser invested $20,000 in GM bonds, Mr. Tuckerman’s retirement savings were worth $260,000, he said.

He needed a lot of investment income to pay the hefty bills for Brighton Gardens. The bills at Culpeper Gardens, where he now lives, are much smaller — as is his portfolio.

His investments are now worth $90,000, hurt by the declining market and bad investments, including his GM bonds and the Brighton Gardens bills.

Mr. Tuckerman’s son and an investment adviser ran his portfolio until he took back control last year.

“I didn’t even know [GM bonds] were junk status,” he said. “I said, ‘Are these junk bonds? Why in the world did we ever buy those?’”

Yet he held on to the bonds.

“I was liking the [$2,174 a year in] income that came from them. I had no idea it was going to go down in value.”

With $13,000 a year in Social Security and a $7,000-a-year pension, Mr. Tucker depended on the $14,000 a year in investment income he was receiving. He now collects just $10,000 from the investments, largely because the GM bonds have stopped paying out.

“How can the government take over the majority share of the thing and leave the people who invested $27 billion to support GM next to nothing?” Mr. Tuckerman asked.

Still, Mr. Tuckerman remains upbeat. He has a large family to support him if he is ever in need. Some family members worry that he may be enjoying life too much, he said.

“I recently got my driver’s license again,” he said proudly. “I’m driving around in an ‘04 Cadillac DeVille. My children are upset.

“I also play golf once a week,” he said.

William Ehart, Sarah Riordan, Amanda Baker, Katherine Timpf, Andrea Billups and John P. Krudy contributed to this report.