The company made the disclosure Thursday in a filing with the U.S. Securities and Exchange Commission.
General Motors bondholders agreed to a sweetened deal -- but the 11th-hour deal is not expected to help the ailing automaker swerve out of the path of bankruptcy.
A filing could come as soon as June 1, with GM selling most of its assets to a company being formed by the federal government. The feds would own more than 70% of GM under the plan. The deal with about a third of the bondholders who hold $27 billion worth of the automaker's debt was expected to smooth the bankruptcy reorganization process, according to Bloomberg News. Those bondholders had balked at an offer of a 10% stake in the company, but agreed to a sweetened version that coul give them 25% of the company if it reorganizes successfully.
The company announced the deal with bondholders Thursday in a filing with the U.S. Securities and Exchange Commission, but officials would not confirm the looming bankruptcy filing.
Sources said bankruptcy is the company's last shot at slashing billions of dollars in remaining debt that has made competing in a recession impossible.
“By freeing GM of tens of billions of dollars in debt, bankruptcy will give it a new lease on life,” Lynn LoPucki, a law professor at the University of California, Los Angeles, told Bloomberg.
The filing says if the bondholders don't agree to support the sale of most of the company to the feds, then the amount of stock and warrants they get would be reduced or eliminated.
Shares of General Motors are trading around $1.25. Five years ago, shares traded for about $50.
Filing for bankruptcy would make the U.S. government GM's owner, but the Obama administration has said that it wants to divest from GM as soon as possible if the company filed for Chapter 11 protection.
Meanwhile, Chrysler is emerging from bankruptcy after it filed for protection on April 30. The company was able to restructure more quickly than initially thought.