Creditors reject GM deal

"The principal amount of notes tendered was substantially less than the amount required by GM ... to meet debt reduction objectives," the company said, the Detroit Free Press reported Wednesday.

The creditor's decision puts GM a step closer to declaring bankruptcy as the U.S. Treasury Department gave GM until June 1 to arrange a financial plan that would allow the government to extend its emergency line of credit.

In the latest bankruptcy plan, the U.S. and Canadian governments would own about 72 percent of GM.

The U.S. government would loan GM about $30 billion -- on top of $19.5 billion already invested -- while the Canadian government would pitch in about $9 billion, The Washington Post reported.

A deal with the United Auto Workers could end up with 17.5 percent of the company. Union members are set to vote Wednesday on a deal that includes cost cutting measures and swaps a retiree healthcare obligation for equity.

The offer to bondholders was contingent on 90 percent of creditors agreeing to the deal. GM said it would convene a board of directors meeting to discuss its next move.

Copyright 2009 by United Press International.