Expert: Doug Ingram - 4/3/2009

Question
Hello,
  My dad bought a GM bond for my nephew about 15 years ago and it is due to mature in 2012.  If GM goes broke, will the bond be worthless?  Thanks.
Michele

Answer
Debt has priority over stockholders, so it could have some value even if stockholders get nothing (in the event of bankruptcy).
There are also degrees of priority. (senior debt has first claim on assets)
Unfortunately, there is the possibility it could be worthless depending on how bad things get.
I am no credit expert on GM, so it my be good to get a few opinions from some broker's equity analysts.

There's no clear yes or no here.  Many times bondholders get some settlement even when a company is forced into bankruptcy.