Yesterday, General Motors and its bondholders had officially called it quits, and GM was headed for a certain and certain-to-be-rocky bankruptcy. Today, according to a company filing, The General and the necessary chunk of its bondholders have come to an agreement, and the company looks to be headed to a slightly less rocky bankruptcy.

CNN explains that GM's bondholders with $27 billion in GM debt had been offered 10% of the company in exchange for their paper. A major group of bondholders with 20% of that debt, roughly $5.5 billion, is said to have preliminarily approved the deal. One of the sweeteners that finally got them to swallow the medicine was offering all bondholders the chance to buy another 15% of the new, post-bankruptcy company “at a low price.”

The other: GM won't have to repay any of the government loans it has received or that it will receive in bankruptcy, with the government taking a 72.5% stake in the company instead. The relief to the balance sheet also helped sway the bondholders. In the interim, the UAW will get a 17.5% stake, with the bondholders getting the rest. The bondholders had to agree not to fight the bankruptcy in court. Bondholders have until Saturday afternoon to officially declare their acceptance of the deal.

It has been presented up to now that the lack of a bondholder agreement is what kept GM headed toward bankruptcy. Yet even though GM supposedly has an agreement, it is still widely expected to declare bankruptcy next week. The company needs to shed its anchors and barnacles quickly – and it appears it will still take a BK will do that.

[Source: CNN]