GM sale stay denied; judge says liquidation would be 'disastrous'

By Caroline Salls

Pittsburgh, July 8 - General Motors Corp.'s asbestos claimants' request for a stay of the company's sale approval pending outcome of the claimants' appeal was denied Wednesday by the U.S. Bankruptcy Court for the Southern District of New York.

"We're here faced with potentially grievous systemic damage to the automobile industry and the states and municipalities where GM workers, retirees and dealers reside," judge Robert E. Gerber said in his bench decision.

"Granting a stay on this showing (or lack of showing), at the expense of all of those other interests - and especially, without the bond that would be necessary to give them the slightest semblance of compensation - would be unconscionable."

Gerber said he estimates that the asbestos claimants would have to post a bond of at least $4.7 billion to cover the potential loss to GM's estate that would result from a stay of the sale order, and the asbestos claimants said they could not post that bond.

"The U.S. Government is not willing to keep funding GM while creditors block the 363 transaction to improve upon their individual recoveries," Gerber said in his ruling.

"The only alternative to an immediate sale is liquidation - which would be 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."

In addition, the judge said the asbestos claimants did not satisfy their requirement to prove that they have a likelihood of success in their appeal.

If the sale closes, Gerber said he assumes that there is "at least a very high probability that the appeal will be dismissed as moot."

Gerber also denied a motion by the asbestos claimants and GM tort litigants to have their appeals certified directly to the circuit court level.

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

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