The fate of General MotorsGTM hangs in the balance this week as the struggling automaker attempts to get enough bondholders to accept a debt-for-equity swap in order to avoid filing for bankruptcy protection.
Bondholders have until midnight ET Tuesday to make their final decision on whether to forgive debt in exchange for a 10% stake in a restructured company.
GM's unsecured bondholders have been resistant to take the offer which would allow the company to wipe out $27 billion in debt. Analysts say it's unlikely enough bondholders will approve the offer, meaning GM would probably be forced into bankruptcy protection.
"I would say this is a sound rejection of an unsuitable offer," said Pete Hastings, a credit analyst at Morgan Keegan who has followed GM. "I have been saying for some time that this thing was dead on arrival and we were just waiting for the doctor to pronounce it dead."
GM had no comment on the bond exchange. The automaker said it would detail results of the exchange on Wednesday.
GM did reach an agreement on Tuesday with the leadership of the United Auto Workers that would give the union up to 20% of its common stock, $6.5 billion of preferred shares and a $2.5 billion note to fund a trust that will take over retiree health care costs starting next year.
The union's trust will also get a seat on GM's new board of directors, although that seat will have to vote at the direction of the other independent directors.
The funding is part of a tentative agreement that union members will vote on this week as GM tries to pull together the remaining pieces that would allow it to restructure outside of bankruptcy.
Members of the Canadian Auto Workers union approved wage reductions and other concessions Monday.
Plant-level union officials met in Detroit on Tuesday to hear details of the agreement that GM, the UAW and the government reached last week. Several local presidents said after the briefing that they voted unanimously to recommend that members approve the concessions.
Local union leaders said the 14 factories that GM intends to close were not identified in the agreement or by UAW international officials. Those are part of GM's restructuring plan to be submitted to the government by a Monday deadline, said one of the officials, who spoke on condition of anonymity because the details of the meeting have not been presented to union members.
The company did commit to reopening three closed assembly plants and one stamping factory if demand warrants, according to the summary sheet. The factories were not identified.
Mike Green, president of a UAW local at a Cadillac factory in Lansing, Mich., said the leaders know it's better to have an agreement in place in case GM is forced into bankruptcy. Union members will vote on the concessions Wednesday and Thursday.
"If you don't ratify it, you go into bankruptcy court with nothing," Green said. "If you go in with this, at least you have an agreement here. It's a good-faith agreement."
Green said it shows the union is working to help save GM.
"It's too bad everybody didn't, and that's talking about the bondholders," he said.
GM's bondholders have argued that the offer they've received gives them too small a stake for the amount they are owed.
GM wouldn't comment on whether it would file for bankruptcy shortly, but White House spokesman Robert Gibbs said it would go until the deadline.