Apparently, the banks and funds that own most of General Motors' outstanding bonds were not too thrilled with the idea of writing down $27 billion in loans for a mere 10% stake in the restructured company. In response to GM's proposal to swap debt for stock, a committee of bondholders has made a counter offer.
The original GM offer would have given 89% of the automaker to the UAW and the federal government. The counter proposal would shut the government out of the stock swap deal entirely. Instead, creditors and the union would get stakes of 58% and 41% respectively with current stockholders receiving the remaining 1%. The money that the government loaned GM would remain as debt to be paid back at some future date.

The idea is that the government would be better off collecting the interest and not having an obligation to fund the VEBA. Whether this will actually reduce the need for additional government loans going forward as claimed by Eric Siegert, senior managing director of Houlihan Lokey Howard and Zukin and financial advisor to the bondholder committee, is debatable. Either way, nothing is likely to happen today anyway as all focus is now on Chrysler.

[Sources: Detroit News, Automotive News]

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