UPDATE 1-Bondholders say GM on risky path to bankruptcy

* Bondholders committee says debt exchange unfair
* Bankruptcy strategy called "risky"
* Bondholders say administration unfairly favored UAW

DETROIT, April 27 (Reuters) - A committee of General Motors
Corp bondholders representing more than $27 billion of
GM debt on Monday called the automaker's debt-exchange offer
politically motivated and legally risky, and said it had a
small chance to succeed in a way that would avoid bankruptcy.
"We are deeply concerned with today's decision by GM and
the auto task force to offer only a small, inequitable
percentage of stock to its bondholders in exchange for their
bonds," the bondholders said in a statement.
GM said earlier it would offer bondholders new shares in an
attempt to cut 90 percent of its bond debt as part of a deeper
restructuring.
The terms of the deal as dictated by the Obama
administration's autos task force would give bondholders only a
10 percent stake in a restructured GM while reserving an almost
40 percent for the United Auto Workers.
In exchange for its larger equity share, the union would
agree to take $10 billion in stock and $10 billion in cash to
settle GM's obligation to a retiree health care fund.
GM Chief Executive Fritz Henderson said GM would file for
bankruptcy if it was unable to secure the debt reduction target
set for it by the end of next month through a voluntary bond
exchange.
Representatives of the bondholders, who had sought some
parity with the treatment of the UAW's unsecured claims, said
in their statement that GM was on a risky path to bankruptcy.
"This offer demonstrates that the company and the auto task
force, unfortunately, are pinning their hopes on an extremely
risky and legally questionable turnaround in bankruptcy court,
instead of engaging its lenders and workers in the very type of
negotiations that could avoid such a fate," they said.
Houlihan Lokey Howard & Zukin Capital Inc has been working
as the financial adviser to a committee representing the
bondholders including retail investors holding about $6 billion
of the automaker's bond debt.
The law firm Paul, Weiss, Rifkind, Wharton & Garrison LLP
also represents the creditor group as counsel.
(Reporting by Kevin Krolicki; Editing by Ted Kerr)
((kevin.krolicki@reuters.com; 1 313 300 7276))
Keywords: GM/BONDHOLDERS

(C) Reuters 2009. All rights reserved. Republication or redistribution of
Reuters content, including by caching, framing or similar means, is expressly
prohibited without the prior written consent of Reuters. Reuters and the Reuters
sphere logo are registered trademarks and trademarks of the Reuters group of
companies around the world.

nN27181175