Creditors push GM closer to bankruptcy

DETROIT, May 22 (UPI) -- Major General Motors Corp. creditors said Friday they had turned down a debt for equity swap, an action that pushes the U.S. automaker closer to bankruptcy.

Nevin Reilly, a spokesman for the creditor committee, said creditors gave a "universal 'no'" to GM's latest offer, The New York Times reported.

The deal proposed swapping about $27 billion in debt for shares at a ratio of 225 shares per $1,000 of debt.

"Bondholders are being seen as speculative bad guys, but bondholders are investors, many of whom put their retirement money into GM," Reilly said.

Bondholders had proposed swapping their debt for 58 percent of GM. GM's plan, backed by the Treasury Department, would have given creditors 10 percent.

The restructuring also would give the government 50 percent of GM, while a deal struck with the union Thursday would provide the union with 39 percent.

The union agreement, which requires ratification, would allow GM to finance half of a $20 billion retiree health benefit obligation with company stock, sources close to the talks said.

The deal is similar to an arrangement with Chrysler LLC that erased annual cost-of-living raises and reduced breaks for workers, The Detroit News reported.

Having already received $15.4 billion from taxpayers, the company has until June 1 to submit a financial plan to the U.S. government to qualify for additional federal loans.

GM has asked for an additional $11.6 billion, but the bankruptcy route would provide $30 billion in government support, The Washington Post reported.

The Post said the government was preparing to send GM into bankruptcy sooner than the June 1 deadline, but the timing was not set. The $30 billion was also not a concrete figure, the Post said.

GM Chief Executive Officer Fritz Henderson has said bankruptcy is the "probable" outcome of the company's financial difficulties.