GM creditors committee sees flaws in sale agreement but calls deal 'the only option on the table'

By Caroline Salls

Pittsburgh, June 24 - General Motors Corp.'s official committee of unsecured creditors pointed out two flaws in the company's proposed asset sale agreement, although the creditors group said it generally supports the proposed sale and realizes there are no viable alternatives, according to a limited objection filed Wednesday with the U.S. Bankruptcy Court for the Southern District of New York.

"The simple fact is that there are no other viable bids - indeed no serious expressions of interest - to purchase GM's assets and no other feasible way for GM to restructure its business to remain viable," the committee said in the objection.

"The current transaction is the only option on the table.

"The court is thus faced with a clear choice: to approve the proposed sale transaction, preserve the going-concern value of the debtors' businesses, and maximize substantial value for stakeholders (despite the pain that this course will inflict on numerous innocent parties), or reject the transaction and precipitate the dismantling and liquidation of GM to the detriment of all involved."

Despite this, the committee said it felt compelled to object to the sale agreement on the grounds that it cuts off all state law successor liability for the new entity purchasing GM's assets.

The committee said current and future creditors alleging claims based on injuries caused by product defects, breach of implied warranties, asbestos exposure, and denial of post employment benefits would be limited to recourse against the limited assets being left behind in the old company.

According to the objection, this attempt to cut off liability is illegal and "undercuts the otherwise clear message that the new company is assuming the mantel of the old GM for purposes of customer service and will otherwise stand behind GM products."

In addition, the committee said the sale should not be approved unless the company can prove at the sale hearing that the assets left behind in the old company will be enough to pay all administrative expenses and priority claims.

Specifically, the committee said GM's unsecured creditors would only receive stock in the new company after all priority and administrative claims are paid in full.

The committee said the unsecured creditors should not be forced to bear the costs associated with the wind down of GM's bankruptcy estate.

The sale hearing is scheduled for June 30.

GM, a Detroit-based automaker, filed for bankruptcy on June 1. Its Chapter 11 case number is 09-50026.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.