April 1 (Bloomberg) -- General Motors Corp.’s 60-day deadline to restructure is unlikely to be extended because the U.S. won’t repay $1 billion in convertible notes maturing June 1, according to a person with knowledge of the discussions.

President Barack Obama’s auto task force told the biggest U.S. automaker it doesn’t want taxpayer funds used to repay debt maturities, said the person, who declined to be identified because the talks are private. Detroit-based GM has $1 billion of 1.5 percent convertible securities coming due June 1. The debentures, issued in increments of $25, fell $2.77 to $6.48, the lowest closing price since December, according to data compiled by Bloomberg.

GM Chief Executive Officer Fritz Henderson yesterday said that June 1 was the final deadline for completing the debt restructuring and that the automaker may enter bankruptcy sooner if it’s clear an agreement out of court isn’t possible.

“The government has been very specific in providing a deadline by which we have to complete this process and we plan to aggressively pursue them in the next 60 days,” GM spokeswoman Renee Rashid-Merem said, declining additional comment.

Obama gave GM 60 days to come up with deeper cost and debt reductions than the carmaker proposed in its plan submitted in February. GM is trying to prove it’s viable, a U.S. requirement to keep $13.4 billion in federal loans. The president believes a quick, negotiated bankruptcy is the most likely way for GM to restructure and become a competitive automaker, according to people familiar with the matter.

Irresponsible Payout

The Obama administration believes it would be irresponsible to use taxpayer money for principal payments to bondholders, according to a person familiar with the thinking of the task force who declined to be named because the deliberations are private.

As part of its restructuring, GM must shrink $27.5 billion in debt by getting bondholders to swap their claims for equity. The carmaker must also reduce $20.4 billion in obligations to a union-run health-care fund.

Bondholders doubt a debt exchange will succeed outside of bankruptcy because there isn’t enough time under the administration’s deadline, according to a person familiar with the thinking of the committee representing creditors who declined to be named because the discussions are private. A prepackaged bankruptcy is more likely to work, the person said.

To contact the reporter on this story: Caroline Salas in New York at csalas1@bloomberg.net

Last Updated: April 1, 2009 16:44 EDT