Obama Making Big Political Bet on GM

However, Main Street Bondholders, an advocacy group representing a few hundred small bondholders, said it continues to oppose the deal because the VEBA gets a 66% share of its claim, while small bondholders would get only 13% of theirs. The group said it will seek membership on the creditors committee.

"We have a large and growing concern of small bondholders, especially seniors and Baby Boomers who will receive next to nothing under this deal, and we want to ensure that the bankruptcy process is fair to everyone," said Jim Martin, president of the 60 Plus Association, organizers of the bondholders coalition, in a prepared statement.

Among the changes in the new plan, the Treasury would "advance substantial additional funds to GM and convert approximately $40 billion of this into common equity in the new GM, vastly improving the balance sheet of the company and substantially increasing its equity value," the bondholders group said. Also, the Treasury "is converting approximately $30 billion of additional debt into equity, relative to what was disclosed in the original S4 [filing]," the group said.

GM stock was briefly halted in NYSE trading before reopening Thursday. Shares closed Thursday at $1.12, down three cents. They traded as high as $1.42 during the day, but traders gradually became more cognizant that despite the deal with bondholders, the shares are still headed to zero as GM issues new equity in bankruptcy.

In a report on Thursday, Standard & Poor's equity analyst Efraim Levy reiterated a strong sell opinion, saying that even though 10% of the company would go to the "old GM," under bankruptcy law, "lower claims, such as stockholders, cannot get paid before higher claims, such as secured bondholders, receive 100% payment."

The new GM would have about $17 billion in debt, including $8 billion owed to the Treasury, $6 billion in other debt and $2.5 billion owed to the VEBA, according to an SEC filing. It would issue $9 billion in preferred stock paying 9% interest, with $2.5 billion held by Treasury and $6.5 billion held by the VEBA.