GM's most recent offer to its bondholders offered a little bit of cash and a little bit of equity. GM CEO Fritz Henderson's example was that a holder of $1,000 in bonds would end up with $333 and a some equity. After conferring with the Auto Task Force, however, that offer was deemed excessive in light of GM's situation so a new deal is being readied for bondholder approval.
In Henderson's words, "That equity is part of the offer." What he might actually mean is that equity is the offer. CNBC reports that the "Treasury Department wants GM to offer its bondholders a small amount of its stock in exchange for their $29 billion of GM debt."
Having turned down much better offers, we don't expect bondholders to signal approval now. From the outside this looks to be a showdown: GM has appeared to accept the prospect of bankruptcy, and while it wants to tend to business out of court, it will enter a pre-packaged Chapter 11 if necessary; bondholders appear to be looking at The General as if it's got a gun to its head, and they're waiting to see what happens when the trigger gets pulled. We don't have much longer to wait...