Bondholders snub GM, bankruptcy filing likely

Nowhere near enough General Motors bondholders agreed to exchange their debt for stock before a midnight Tuesday deadline, making a bankruptcy filing by the automaker highly likely.

GM had set a threshold of 90 percent of the $27 billion in bond debt it wanted to exchange for 10 percent of the stock in a reorganized company for the deal to take place. In a statement Wednesday, GM said the amount of notes tendered was substantially less than the 90 percent target.

The government has set a June 1 deadline for GM to reorganize its finances as a condition to get more loans. GM has received $19.4 billion in government loans so far.

With the debt exchange soundly rejected, it is widely expected that GM will file for bankruptcy protection, with the government financing the reorganization, before the June 1 deadline.

GM said its board of directors will meet to review its options.

A GM bankruptcy is expected to follow the pattern set by Chrysler, which filed for bankruptcy in early May after it could not renegotiate its debt. The Chrysler reorganization is being largely directed by the government, which is providing the reorganization funding.

On Tuesday, the United Auto Workers said it would take a 20 percent stake in a reorganized GM, a reduction from the 39 percent stake it originally sought. The majority of a reorganized GM would be held by the government.

By Dale Jewett