May 29 (Bloomberg) -- U.S. taxpayers may stand to lose the most in a General Motors Corp. bankruptcy, said Edward Altman, a professor at New York University’s Stern School of Business.

“The bill is now up to $50 billion or more, which is what we said would be needed, but the government should be first in line,” Altman said today on Bloomberg Television. “The government will now have stock in the company, more than 72 percent. It is a big uncertainty if the company will do well. The potential biggest loser, unfortunately, is the U.S. taxpayer.”

The largest U.S. automaker plans to file for bankruptcy protection June 1, according to people familiar with the matter. The U.S. will fund GM’s reorganization with about $50 billion, including the automaker’s existing $19.4 billion in federal loans, the company said in a statement.

GM, contemplating a sale of assets to a new company through bankruptcy, would give 72.5 percent of GM’s equity to the U.S. Treasury, 17.5 percent to a union health trust, and a 10 percent stake to the old GM to pay bondholders and other creditors, the Detroit-based automaker said yesterday in a filing.

The filing details the debt to be owed by the “new GM,” which consists of $8 billion in new loans from the U.S. Treasury, $2.5 billion owed to the United Auto Workers union fund and $6.5 billion in other borrowings. The Treasury will also get $2.5 billion in preferred shares that pay a 9 percent annual dividend. Debt ranks before equity for repayment in a company’s capital structure.

Treasury Conversion

The Treasury would convert more than $50 billion of debt, up from a previous consideration of at least $10.7 billion, into common shares, preferred stock and warrants under the plan, GM said.

Altman, the creator of the Z-Score formula that calculates a company’s probability of bankruptcy, said he’s concerned that GM’s struggles may persist even after emerging from bankruptcy. The company has had almost $88 billion in losses since 2004.

“There are a disturbing number of Chapter 22s, where they have to file again within five years because it did not work and they either have too much debt or haven’t fixed the operational problems,” Altman said. “GM will fix the debt. The question is, will the economy permit them to do it? I have great doubts that will happen.”

Tom Wilkinson, a spokesman for GM, declined to comment.

Bondholder Agreement

GM said yesterday it reached an agreement with some of its largest bondholders to smooth the way through bankruptcy. After rejecting an offer to swap their debt for a 10 percent stake, a bondholder group representing 20 percent of the $27.2 billion in principal agreed to support the terms of the new plan. GM sweetened the deal, proposing bondholders get warrants for as much as 15 percent more equity if they supported the government’s plan.

The U.S. has “done a remarkable job” preparing GM for bankruptcy, Altman said. “Six months ago, I would never have thought that a company as large and complex” could go through bankruptcy quickly, he said.

Altman said the United Auto Workers union represents “the big winners” in GM’s bankruptcy. A UAW health-care trust was offered $6.5 billion in preferred stock that pays a 9 percent dividend and a $2.5 billion note in addition to their 17.5 percent equity stake for their $20 billion in claims.

“It could have been much worse for them,” Altman said.

To contact the reporters on this story: Greg Miles in New York at gmiles1@bloomberg.net; Caroline Salas in New York at csalas1@bloomberg.net

Last Updated: May 29, 2009 14:44 EDT