Majority of GM bondholders support new debt-swap deal

ByABC News
May 31, 2009, 3:36 PM

DETROIT -- More than 50% of General Motors Corp. bondholders said Sunday they would support a sweetened deal to swap the company's $27 billion debt for stock in a restructured, leaner GM.

According to a statement from a group of ad hoc institutional bondholders, 54% of GM bondholders met a 5 p.m. Saturday deadline to exchange their unsecured bonds for a 10% stake in a newly restructured company and warrants to purchase a greater share of the new GM at a later date.

That agreement should make the automaker's reorganization go more smoothly after it enters bankruptcy protection, as is expected Monday in New York. The move is seen as one of the critical last steps in GM's path to enter bankruptcy protection in hopes to quickly exit a slimmer, more effective automaker. The company has been working through the weekend to make its final decisions on how to proceed with a court filing. It has a government-imposed June 1 deadline to finalize those plans.

Last week, bondholders resoundingly rejected an exchange offer that did not include warrants to purchase an additional 15% of the new GM.

The ad hoc committee, which said last week it would support the deal, made up 20% of the acceptance. The 15% of bondholders who accepted the original offer supported the new one, and "approximately 19% more indicated their support over the last few days," said the group's spokesman in an e-mail. He also said that "975 institutions either sent support letters or gave us indications of support."

The company is surviving on nearly $20 billion in government aid and is poised to get $30 billion more as it reorganizes under court protection.

Although GM has not confirmed that it will file for bankruptcy protection, the company's Chief Executive Officer Fritz Henderson will hold a news conference in New York Monday morning, and President Obama is expected to give a speech addressing the Detroit automaker's fate. In exchange for a total of $50 billion in taxpayer aid, the government will take a 72.5% stake in GM.