Former GM committee looks to keep Treasury out of term loan lawsuit

By Caroline Salls

Pittsburgh, Oct. 4 - Motors Liquidation Co.'s official committee of unsecured creditors is asking the U.S. Bankruptcy Court for the Southern District of New York to enforce its orders approving the company's debtor-in-possession financing and wind-down agreement to allow the committee to prosecute a term loan lawsuit, according to a Monday court filing.

The committee said the Treasury claimed for the first time on Aug. 26 that it, and not Motors Liquidation's unsecured creditors, owned a term loan lawsuit filed by the committee in 2009 that seeks the return of $1.5 billion paid on account of a voidable security interest.

In addition, the company's plan of liquidation called for the ownership of the term loan litigation to be determined by the court or through negotiations between the Treasury and the committee, at the Treasury's request.

However, the committee said the Treasury's position on the term loan lawsuit contradicts the final order approving the original $33.3 billion DIP facility and the company's wind-down order.

The committee said the Treasury agreed to these orders before they were approved by the court.

Under the orders in question, the committee said it has sole standing to file the term loan lawsuit, and the lawsuit is specifically excluded from the Treasury's collateral.

Since the Treasury's recourse is limited to its collateral, the committee said the Treasury has no interest in the lawsuit.

"Treasury must live up to its agreements," the committee said in the motion.

A hearing is scheduled for Oct. 21.

Motors Liquidation was formerly General Motors Corp., a Detroit-based automaker that filed for bankruptcy on June 1, 2009. The new General Motors Corp. emerged from Chapter 11 on July 10, 2009, and Motors Liquidation's Chapter 11 case number is 09-50026.

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