Bondholder discontent isn't surprising here, considering the government loan conditions mandate GM exchanges two-thirds of its $27 billion in debt into liquidity. If GM doesn't hit its target, the automaker would be forced to give back $13.4 billion in government loans, guaranteeing chapter 11 bankruptcy. If bondholders acquiesce and agree to the debt reduction and GM still goes bankrupt, the bondholder equity would be worthless.
There don't seem to be many great options for debt holders, but then again, GM was paying high-interest rates all these years for a reason. Barring an extension from the Obama administration, GM will need to fulfill all the demands of the government loan by March 31.
[Source: Detroit News]