GM bondholders meet to weigh autos plan

NEW YORK (Reuters) - The committee representing General Motors bondholders and its advisers convened a conference call on Monday to discuss the next steps for the automaker's debt restructuring, a person familiar with the matter said.

The meeting of bondholders came hours after the U.S. officials rejected the automaker's turnaround plan, saying it did not go far enough to reduce debt and that bondholders were blocking progress on a more sweeping restructuring.

GM has offered bondholders 8 cents on the dollar in cash, 16 cents on the dollar in new, unsecured debt; and a 90 percent stake in the automaker, said a second person with knowledge of the discussions who asked not to be named because of their confidential nature.

With about $28 billion in debt to bondholders, the GM offer made to bondholders about a week ago would translate into $2.2 billion in cash, $4.3 billion in debt and an additional stock-based payout in a recapitalized company that would all but wipe out current stockholders.

GM's debt weakened and its credit protection costs rose on Monday after the government balked at offering more bailout money for now and said bankruptcy was an option.

Bondholders said in a statement on Monday they were "very disappointed" that the government and company have had no real dialogue with bondholders while designing the overhaul of GM.

"Bondholders did not cause GM's problems, as the low-coupon, investment-grade bonds they purchased were largely used by the company to fund daily operations and, more recently, to pay for retiree costs," the debt holders said in a statement.

GM has $1 billion in convertible debt coming due on June 1, which is close to the 60-day deadline set by the Obama administration for GM to resubmit its overall restructuring plan.

GM bondholders had expected to recover 30 cents to 33 cents on the dollar in the event of a default or bankruptcy by the automaker, but those expectations have fallen sharply, according to bond investors and credit market participants.

The new mark may now be as low as 20 cents on the dollar, said Jamie Cox, managing partner at financial planning firm Harris Financial Group in Colonial Heights, Virginia.

GM's benchmark 8.375 percent notes due 2033 fell 2.75 cents on Monday to 16 cents on the dollar, to yield about 52 percent, according to MarketAxess data.

Kip Penniman, an analyst at credit research firm KDP Investment Advisors, said a quick, pre-arranged bankruptcy could still result in recoveries of close to 30 cents, versus zero for a traditional drawn-out bankruptcy.

"The unknown is just how much (a prolonged bankruptcy) would destroy the company's ultimate value," Penniman said. "A lot of people don't want to touch these bonds because this is a political analysis now."

(Reporting by Walden Siew and Dena Aubin, Editing by Jonathan Oatis)