Judge OK’s U.S. plan to expedite sale of GM assets
This article was originally on a blog post platform and may be missing photos, graphics or links. See About archive blog posts.
The Obama administration’s plan for General Motors Corp. advanced late Sunday when a U.S. Bankruptcy Court judge agreed to the sale of the assets that will make up the ‘new’ GM.
From Bloomberg News:
General Motors won approval to sell most of its assets to a U.S. Treasury-funded buyer, cementing the Obama administration’s efforts to remake the auto industry and leaving restructuring professionals with several years of work to liquidate the leftovers. U.S. Bankruptcy Judge Robert Gerber in New York issued his ruling saying the proposed sale was the only option available to the struggling Detroit-based automaker. He largely followed the ruling of his counterpart on the Manhattan court, Arthur Gonzalez, who approved the sale of most of the assets of GM’s smaller rival Chrysler LLC. “As nobody can seriously dispute, the only alternative to an immediate sale is liquidation -- a disastrous result for GM’s creditors, its employees, the suppliers who depend on GM for their own existence, and the communities in which GM operates,” Gerber said in an 87-page opinion. “In the event of a liquidation, creditors now trying to increase their incremental recoveries would get nothing.”
Some bondholders and other creditors were fighting the administration’s plan to rush GM’s sale in Chapter 11 proceedings, contending that a traditional bankruptcy workout would have been fairer to all parties.
But Treasury auto task force advisor Harry Wilson last week said the government wouldn’t provide further financing to GM if an order approving the sale of the company wasn’t signed by July 10.
Gerber used a medical-emergency analogy to justify his decision: “Bankruptcy courts have the power to authorize sales of assets at a time when there still is value to preserve -- to prevent the death of the patient on the operating table,” he wrote in his opinion.
Under the terms of the deal, the U.S. will get 60% of the new GM in return for its $50 billion in bailout loans. The Canadian government will get 11.7% for the loans it has extended to the company. A United Auto Workers fund will get 17.5% and bondholders and other creditors will share the remaining 10%.
GM’s shareholders are expected to get nothing.
The Obama administration says it expects to begin selling its stake via a public stock offering by the reorganized GM sometime in 2010.
-- Tom Petruno