GM Generali

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A majority of investors holding $27 billion in General Motors Corp. (GM) bonds have agreed to forgive the debt for equity in the new company, people familiar with the situation said, smoothing the way for the auto maker as it prepares for a bankruptcy filing expected Monday.

A battle with the group was one of the biggest hurdles biggest hurdles GM faced in orchestrating a quick exit from Chapter 11.

A spokesman for the bond committee said approximately 54% of the bondholders have indicated their support and that 975 institutions either sent support letters or gave indications of support.

Of the supporters, 20% we on the ad hoc committee, 15% accepted the initial tender offer and about 19% more indicated support over the last few days following the sweetened deal.

The auto maker, living on U.S. government loans, faces a Monday deadline imposed by the Obama administration.

There's little doubt GM is headed for bankruptcy, particularly after the company announced Friday that Chief Executive Fritz Henderson would give a press conference on Monday in New York outlining proceedings that would likely take place.

Initially, the company said getting bondholders to agree to a debt swap was its best chance for avoiding Chapter 11. But the latest plan is designed to expedite a bankruptcy filling more than to avoid it. As part of the agreement, bondholders pledged not to oppose GM's reorganization in court.

Although the committee supported the deal, a group of dissident bondholders represented by Thomas Lauria, a lawyer for holdouts in the Chrysler case, fought against it. They argued small, individual bondholders were left with no voice as the U.S. Treasury negotiated directly with GM's large institutional bondholders.

Bondholders had until Saturday evening to voice support for a new offer that would give them more than a 20% stake in GM - a 10% share of the restructured company and warrants for another 15%.

It was up to Treasury, which brokered the deal, to determine whether enough bondholders agreed for the offer to stand. A people familiar with the talks said Treasury felt an adequite number had signed off. This person said "more than 50% agreed."

The government sweetened the offer last week after bondholders overwhelmingly rejected an earlier proposal that would have left them with 10% equity in the new GM. Analysts' estimates have bondholders coming out of the new deal with around 10 cents on the dollar, compared to as little as nothing under the old offer.

An ad hoc committee representing major bondholders agreed to support and encourage other big investors to back the deal.

Under the plan, the Treasury would provide GM with $30 billion in loans to keep running through a bankruptcy, in addition to $20 billion already given to the company. GM won't have to repay the loans, instead, the government will turn them into a controlling stake in the company. The UAW would end up with at least a 17.5% stake in the new company after agreeing to concessions that will save GM about $10 billion in obligations to retiree health care as well as billions more on labor costs. In exchange, GM agreed to use a soon-to-be-determined idled plant to build a small car in the U.S.

GM and the Obama administration, encouraged by Chrysler LLC's progress in bankruptcy court over the last month, hope the company could emerge in as little as 30 days. GM, however, could still face challenges from hundreds of dealers its trying to shut down. The company also is still negotiating with Delphi Corp. (DPH), its bankrupt former parts arm.

-By Sharon Terlep, Dow Jones Newswires; 248-204-5532; sharon.terlep@dowjones.com