Money Matters, Simplified.
GM awaits judge’s ruling on sale
by Jamie Anderson - July 3, 2009 - comments
New GM could emerge from bankruptcy protection as soon as this weekend if a U.S. judge approves its proposed plan to sell off its best assets to a company owned by the government
New York, July 3: The ball is in the court of U.S. Bankruptcy Judge Robert Gerber. After three full days of court hearings, wherein lawyers for General Motor Corp. (Pink Sheets: GMGMQ, OTCBB: GMGMQ) locked horns with lawyers representing creditors who are resisting the Detroit automaker’s reorganization plans, it is left to the federal judge to decide the fate of GM.
The ailing automaker that has been on life support system and sustaining itself on bailout funds intends to craft a streamlined carmaker by selling its best assets to a new company, Vehicle Acquisition Holdings LLC.
The said company will be collectively owned by the American and Canadian governments and a health care trust for the United Automobile Workers union.
The creditors are crying hoarse that they deserve more compensation for their claims. Their lawyers, in typical legal parlance, argue that the sale will strip them of their rights as creditors.
The GM proposal
Meanwhile, GM has submitted a new proposal to answer many of the objections filed against the initial sales plan. Among others, the new plan includes increase in money available to wind down the old company from $950 million to $1.175 billion.
As a part of the reorganization plan, GM will have to part ways with its Chevrolet and Cadillac brands also.
The automaker had filed for bankruptcy a little over a month back, and if Judge Gerber approves the sale, the turnaround would be extremely fast for the company. On the contrary, failure to approve the sale would be "catastrophic" for the firm.
The Obama administration has kept a July 10 deadline, post which the U.S. treasury will stop funding GM and the Hobson’s choice for the automaker would be liquidation.
The verbal duel
Michael Richman, a counsel representing three rebel bondholders, referred to the Obama administration’s July 10 deadline as a bluff. He said, “It’s not credible to think the next day the government will say, ‘Now we’ll let G. M. fail.’”
The war of words did not end at that. Harvey R. Miller, the main lawyer representing GM, said of the dissenting creditors, “The objectors are asking you to play Russian roulette. In effect, the objectors are saying, ‘If I can’t get my pound of flesh, let G. M. go down in flames.’”