General Motors announced this morning that its bondholders had rejected a plan to give almost 40% of a restructured GM to the UAW while they got only 10% for their investment.  GM needed 90% of its bondholders to agree to the government-imposed deal for it to win approval and keep the company out of bankruptcy.  Instead, GM says they got “substantially less” cooperation from their creditors:

General Motors (GM) said Wednesday that not enough bondholders agreed to an exchange offer, which expired at midnight Tuesday, to make the deal go through. GM’s board of directors will meet shortly to discuss the next step.

The automaker was attempting to persuade bondholders to trade in $27.2 billion in unsecured public debt notes in exchange for a 10% stake in the restructured automaker. GM needed 90% of bondholders to agree to the plan. On Wednesday, the automaker said the amount of notes turned in were “substantially less than the amount required by GM to satisfy the debt reduction requirement” set forth by the U.S. Treasury.

“Since these conditions, as well as certain other conditions, have not been satisfied, the exchange offer will not be consummated,” the company said in a statement released Wednesday morning.

GM needed to get the deal done in order to qualify for more loans from the U.S. government. Now, it is facing filing for bankruptcy any time before June 1, its deadline set by the government to get certain restructuring moves completed.

This deal looked even worse for the bondholders than the one crammed down the throats of Chrysler’s creditors.  At least they wound up with cash, albeit at 29 cents on the dollar, face value.  GM’s creditors would end up with 10% of the company for its $27 billion investment, while the UAW would get 39% for a much lower loss on a renegotiation of pension obligations, similar to that in the Chrysler deal.  Not surprisingly, the creditors want more compensation for a bigger investment, and will rely on the bankruptcy process to secure their rights.

However, as the Obama administration demonstrated during the Chrysler liquidation, they’re not terribly concerned about staying within the lines of bankruptcy law, especially when they can pressure creditors to cough up assets to the unions.  How long will it be before these bondholders get seminars from Steve Rattner and the auto industry task force on the “madman theory of the Presidency” and its implications for heartless “speculators” such as themselves?