GM bond deadline passes, bankruptcy seen near

By John Crawley and Kevin Krolicki

WASHINGTON/DETROIT (Reuters) - General Motors on Wednesday prepared to face the fallout from a failed debt exchange that sends the largest U.S. automaker closer to a bankruptcy filing expected by the end of the month.

GM bondholders had until midnight to trade $27 billion in debt for a 10-percent ownership stake in the reorganized company that U.S. officials have said could emerge from a quick trip through bankruptcy court.

As the deadline passed early on Wednesday there was no immediate word from GM on how much debt the offer had succeeded in retiring. The Treasury also had no immediate comment.

GM's bond exchange offer had been dogged by criticism since it was launched a month ago that it was an unfairly low payout made at the direction of U.S. officials more sympathetic to the competing claims of GM's unionized workers and retirees.

But the exchange had also been seen as GM's last remaining hope to cut debt outside the kind of government-financed bankruptcy that has been underway for its smaller rival Chrysler since the end of April.

GM planned to detail the results of the debt exchange offer on Wednesday morning, spokeswoman Renee Rashid-Merem said.

The automaker's board could also meet as soon as Wednesday to review options for the automaker that has been kept in operation since the start of the year with $19.4 billion in emergency federal loans, representatives said.

The bondholder deal was running well short of the company's goal and had attracted only a low single-digit percentage of the $27 billion targeted as of Tuesday afternoon.

That was nowhere near the 90-percent support GM had set as a target to stave off bankruptcy, two sources familiar with the discussions told Reuters.

Separately, people involved in the effort to restructure GM under federal supervision said the Obama administration believed that the plan overwhelmingly rejected by bondholders was fair.

But the autos task force also remained willing to talk with bondholders after the expiration of the debt exchange deadline, the sources said on condition that they not be named.

BLAME THE BONDHOLDERS?

Analysts said GM's bondholders had tipped the company toward a near-certain bankruptcy that would rank as one of the largest and most complex reorganizations in U.S. history.

"I think the exchange offer was really a transparent attempt to blame bondholders for the bankruptcy rather than to accept responsibility for years of mismanagement and failure to anticipate things that should have been understood," said Richard Tilton, a restructuring analyst at Covenant Review.

"I think the task force made that hurdle so high, they wanted them to go into bankruptcy, they see that as the solution," independent auto industry analyst Erich Merkle said on Tuesday.