GM Bondholders Reject Offer, Bankruptcy Likely

As we told you earlier today, the deadline set for GM's bondholders (to accept or decline the swap of a $27 billion for a 10 percent stake in the reorganized company), came and went last night. Their decision was made public today and, as was the case with Chrysler, the answer was NO.

"I would say this is a sound rejection of an unsuitable offer," Pete Hastings, a credit analyst at Morgan Keegan was quoted as saying by Reuters. "I have been saying for some time that this thing was dead on arrival and we were just waiting for the doctor to pronounce it dead. Now that's happened."

As was to be expected, GM's offer did not manage to draw 90 percent of bondholders to its corner, as an inside source within the company said the offer drew only a "low-single-digit" of the bondholders to GM's side.

As it becomes more and more obvious were this is heading, the US government stepped in and said that it does not plan on becoming an active shareholder in General Motors, this despite the fact that there is a big chance for the US to take an ownership stake.

"We are reluctant, somewhat involuntary shareholders in this situation," one of the sources told Reuters. "We want to be shareholders for as short a period of time and almost in as inactive a way as we can responsibly be."

As for the bankruptcy process, it is expected to be longer than the one Chrysler is going through (sources claim that Chrysler is already nearing an exit). GM is bigger, more complex, therefore it will not be as "easy' as it may turn out to be for Chrysler.