GM’s ‘Main Street’ Bondholders Back Big-Bank Counteroffer

A small group of investors holding General Motors Corp. bonds, who recently formed under the “Main Street” moniker, endorses a counteroffer made to the auto maker yesterday by larger bondholders.

Earlier this week, GM launched a bond exchange to shed some $27 billion of debt as part of its restructuring. The offer included 225 shares of GM stock for every $1,000 worth of debt held, or a 10% share in the company, in return for forgiveness of the debt.

But big investment banks holding most of the auto maker’s debt called the offer unfair and countered Thursday with a deal that would see them gain 58% of the reconstituted company. The health-care trust GM set up for United Auto Workers retirees would get 41%, instead of the promised 39%.

The large bondholders’ offer leaves no stake in GM for the Department of Treasury, whereas the auto maker’s offer gives the government 51% in exchange for $15.4 billion in taxpayer loans the auto maker has received.

The Main Street bondholders call the big-bank counteroffer a “fair” and “respectable” deal that could save GM from bankruptcy.

GM President and CEO Fritz Henderson said earlier this week, when the auto maker launched its debt-for-equity swap, only a successful bond exchange would keep it out of bankruptcy.

“(The swap) needs to be successful to avert bankruptcy; we think it can be,” Henderson said.

At Chrysler LLC, a small group of bondholders holding out for a sweeter deal in the auto maker’s debt-for-equity swap forced the company to file for bankruptcy yesterday.