The largest U.S. automaker GM could soon learn whether it will emerge as a new, largely debt-free company as lawyers at a New York based bankruptcy court finished on July 2 closing arguments in GM's asset sale hearing.
According to local media reports, a lawyer representing GM's small bondholders Thursday urged a judge to call the government's bluff that it will stop funding the automaker's restructuring if a sale is not approved by July 10.
The lawyer, Michael Richman, objects to GM using Section 363 of the Chapter 11 bankruptcy code to try to divide its assets and sell the best to form a new GM. The bad assets would remain in court as part of the old GM and be liquidated, leaving many creditors with lawsuits, claims and benefits left behind in bankruptcy court.
His testimony began the third day of GM's asset sale hearing in front of U.S. Bankruptcy Judge Robert Gerber.
Creditors, who have objected to the sale of GM's good asset to the U.S. government and speedy emergence of GM from bankruptcy court, are delivering closing arguments Thursday morning.
Richman also dismissed arguments from GM President and CEO Fritz Henderson and others that the automaker's best assets are jeopardized by a prolonged stay in bankruptcy court.
He urged Gerber to reject the sale, saying GM could still restructure in an accelerated, traditional Chapter 11 case.
The objectors are endangering thousands of jobs, the welfare of communities that rely on GM and imperiling the automaker's assets by betting the government is lying about its intention to pull its funding, the automaker's lawyer Harvey Miller said.
It is unclear whether Bankruptcy Judge Robert Gerber would rule later Thursday or wait until after the July 4 holiday weekend.
GM Thursday made more progress in resolving some objections filed by a creditors committee. The committee has agreed to withdraw its objection after negotiating a deal that will have the new GM assume responsibility for workers compensation claims filed in Michigan. Michigan is believed to have the most workers with claims in the country.
The creditors committee also agreed to withdraw its objection after finalizing the makeup of the old GM's Board of Directors.
If a sale is approved and GM is split into old and new companies, the old GM's Board of Directors will include at least three members and one member will be selected by the creditors committee.
The objectors risk seeing lawsuits, claims and benefits left behind in bankruptcy court and want the judge to force GM to give them a better deal. They pose the largest obstacle to a new GM emerging from bankruptcy.
A member of the Obama administration's auto task force, which is overseeing GM's restructuring, testified Wednesday that the U.S. government has no intention of funding GM's restructuring beyond July 10 if the automaker's asset sale is not approved in bankruptcy court.
GM was 172 billion U.S. dollars in debt. Now creditors will learn who gets repaid and how much. The bankruptcy is America's fourth largest, but the largest for a manufacturer.
GM filed for court protection from creditors on June 1. There have been more than 850 objections filed to the proposed sale, which would leave many creditors who are owed money or who have pending lawsuits against the automaker with the likelihood of receiving little money, or nothing, if GM is able to dump liabilities and debt in the old GM.
The U.S. Treasury Department plans to buy GM's good assets and provide the automaker with an additional 30.1 billion dollars to operate while in bankruptcy. That will boost the government's total investment in GM to 50.5 billion dollars.
The U.S. government will own 60.8 percent of GM, while the Canadian government will hold 11.7 percent and a United Auto Workers health-care trust will own 17.5 percent. Unsecured creditors will own 10 percent.
Source:Xinhua
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