Deadline for GM bondholders approaches; bankruptcy possible

— -- 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.