GM bondholders propose counteroffer, seek majority stake

General Motors GM bondholders want a majority stake in the restructured automaker in exchange for forgiving their claim to $27 billion of GM debt, a committee representing the bondholders said Thursday.

The bondholders' counterproposal follows a much less generous offer from GM on Monday. GM is working furiously to reorganize and shrink its teetering debt load before a government-imposed restructuring deadline a month away.

The committee said under its proposal GM's bondholders would take a 58% stake in a reorganized automaker. That would leave a union-run health care trust with a 41% stake and current equity holders with 1%.

The proposal leaves the U.S. government without an equity stake in the new GM and saves taxpayers $10 billion, the bondholders said. They said it is fairer than GM's proposal because it allocates equity to the United Auto Workers union and to the bondholders based on how much money they are owed.

The counterproposal comes in response to GM's offer earlier this week to give its bondholders 225 shares for every $1,000 held in bonds. Bondholders have criticized the plan, saying it would leave them with just pennies on the dollar for their 10% equity stake.

The U.S. government, under GM's plan, would get a 50% equity stake in exchange for about $10 billion in loan forgiveness. The UAW, for its part, would get a 39% stake in exchange for $10 billion in payments to its health care trust in stock.

"Unlike the current proposal, our plan does not grant a controlling interest in GM to the federal government," Eric Siegert, a financial adviser to the bondholder committee, said in a statement. "We do not believe that nationalizing one of America's largest and most important companies is the right policy decision for our country."

GM spokesman Tom Wilkinson said in an e-mail that GM has already launched its debt-for-equity exchange and is proceeding with its previous offer.

GM must bring 90% of bondholders on board with the plan for it to work, the company said.

The bondholder committee rejected that offer. Earlier Wednesday, individual bondholders asked for more say in GM's restructuring.

Among them was Chris Crowe, a retired electrician from Denver and part-time home inspector, who tied up $13,000 in General Motors bonds a few years back as college savings for his son. He thought it was safer than putting money in stocks and safer than investing in a company that didn't have a long, respected history.

"It just doesn't seem fair," Crowe said. "I understand there are only so many pieces of the pie, but they are just giving us crumbs."

Individual bondholders are owed about $5 billion, just a slice of GM's total debt, but a big deal for small investors.

Marilyn Jegerlehner, a retired secretary from Monroe, Wis., relies on the monthly interest payments from the bonds she bought with her husband, Ralph, for expenses such as property tax and insurance payments.

They're already cutting back, preparing for the cutoff of the payments. The closest they come to eating out is sharing a $5 sandwich from Subway.

"We have played by the rules all of our lives, and we feel we are being ignored," she said. "We are calling on the administration to look out for us, too."

Richard Tilton, an analyst at Covenant Review and a bankruptcy attorney, said it's probably in the small bondholders' interest for GM to file for bankruptcy. A bankruptcy judge would have to put bondholders' interests ahead of other groups', including the Treasury.

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