Monday, July 6, 2009

GM Bankruptcy Moving Forward

So reports The New York Times:

A federal judge approved a plan by General Motors late on Sunday to sell its best assets to a new, government-backed company, a crucial step for the automaker to restructure and complete its trip through bankruptcy court.

I suppose being GM does get a judge to work on a holiday weekend (some holiday) and work he did:

In his 95-page opinion, Judge Gerber wrote that he agreed with G.M.’s main contention: that the asset sale was needed to preserve its business in the face of steep losses and government financing that is scheduled to run out by the end of the week.

“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,” Judge Gerber wrote.

With the approval of the restructuring plan, G.M. and the government are seeking to close the sale by Thursday afternoon, when a four-day stay of the judge’s order expires. The government, which is financing the reorganization, had given G.M. until Friday to win approval for the sale or risk losing its bankruptcy financing.


If completed by Friday, G.M. would be near the end of an unusually quick trip through the bankruptcy courts, turning itself into smaller company with fewer brands and a new focus on fuel-efficient cars.

Under the terms of the revised deal, G.M. would sell its most desirable assets, including the Chevrolet and Cadillac brands, to a new company owned largely by the American and Canadian governments and a health care trust for the United Automobile Workers union. The Obama administration anticipates taking the company, which will still bear the General Motors name, public next year.

Let us hope that is not old wine in new bottles for several reasons - our tax dollars, the employees, the economy and, frankly, the bankruptcy system.

And now from the creditors' side (or is it just some of them?):
It is possible that creditors who objected to the terms could file an appeal. Lawyers for several opponents argued during the hearings that the G.M. sale stripped them of their rights as creditors. A lawyer representing three dissident bondholders urged Judge Gerber to call what he said was the Obama administration’s bluff on the July 10 deadline.
Er, I think Obama is anything but a bluffer. Not something I would want reported in any newspaper. The fact is that this kind of case - really any Chapter 11 - there is a bit of gamesmanship, of gambling, to get the biggest slice for one's clients without killing the business. More can be gotten if the business is merely lamed and good chance of nothing if the business is in an iron lung.