GM and the Treasury Department, which has been guiding the Detroit automaker toward a rescue plan that will give taxpayers a stake of nearly 75 percent in the company, were quiet on the bondholder's decision.
The Treasury Department must find that there is sufficient acceptance for the deal to move forward. In a previous bond exchange offer, the Treasury demanded participation of 90 percent, a debt exchange of $24 billion. The 54 percent who agreed to the revised deal, represent only $14.6 percent of GM's unsecured debt.
The company has not confirmed it will seek bankruptcy protection, but Chief Executive Officer Fritz Henderson has scheduled a news conference Monday morning in New York. President Barack Obama is also expected to give a speech addressing the Detroit automaker's fate.
The company made a huge stride toward restructuring Friday when the United Auto Workers union agreed to a cost-cutting deal, and early Saturday, Germany's finance minister said a plan was approved for Canadian auto parts maker Magna International Inc. to move ahead with a rescue of GM's Opel unit.
GM is racing to meet the government's Monday deadline to qualify for more aid. It already has received about $20 billion in government loans and could get $30 billion more to make it through what is expected to be a 60-to-90 day reorganization in bankruptcy court.
Treasury Secretary Timothy Geithner, who was traveling to China, followed developments closely taking a military aircraft with the latest in communications equipment that allowed him frequent contact with Steven Rattner, head of the administration's auto task force, and Obama economic aide Lawrence Summers.
The Treasury on Thursday offered bondholders 10 percent of a newly formed GM's stock, plus warrants to buy 15 percent more to erase the debt. Last week, GM withdrew an offer of 10 percent equity after only 15 percent of the thousands of bondholders signed up.
Getting as many bondholders as possible to sign on to the offer in advance of a bankruptcy filing could help the automaker get through the court process more quickly, said Robert Gordon, head of the corporate restructuring and bankruptcy group at Clark Hill PLC in Detroit.
"The more consensus you have, the more likely it is you'll be able to move through the bankruptcy process in an expeditious fashion with less resistance," Gordon said.
In a typical Chapter 11 bankruptcy case, the company files a plan of reorganization that must be voted on by creditors. In each class of creditors, the plan would have to be approved by holders of two-thirds of the claims and a majority of the number of individual creditors who vote.
But the GM case is anything but ordinary, and it appears the company will sell some or all of its assets to a new entity that would become the new GM, rather than submit a plan to reorganize the old company.
Under a so-called Section 363 sale, the prospective buyer and seller present a fully negotiated asset purchase agreement for approval by the court.
Creditors still can lodge objections, but GM could avoid the drawn-out fights between competing creditors, such as bondholders and workers, that often occur.
Chrysler LLC, which filed for bankruptcy protection April 30, chose a similar path. A judge heard three days of testimony and arguments last week over the sale of most of Chrysler's assets to Italian carmaker Fiat SpA.
U.S. Judge Arthur Gonzalez is expected to approve the sale Monday, pushing Chrysler closer to its goal of a speedy exit from bankruptcy protection. But an appeal is likely from three Indiana state pension and construction funds, which invested in Chrysler debt and say the deal isn't fair. That may force Chrysler to further postpone the deal's closing.
GM's stock tumbled to the lowest price in the company's 100-year history on Friday, closing at just 75 cents after trading as low as 74 cents. In a Chapter 11 bankruptcy reorganization, the shares would become virtually worthless.
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