Former GM's committee, indenture trustee want more plan information

By Caroline Salls

Pittsburgh, Oct. 18 - Motors Liquidation Co.'s official committee of unsecured creditors and indenture trustee Wilmington Trust Co. objected to the disclosure statement for the company's plan of liquidation, according to Monday filings with the U.S. Bankruptcy Court for the Southern District of New York.

The committee said it filed a lawsuit in July 2009 to recover $1.5 billion paid to the company's pre-bankruptcy term lenders.

Until recently, the creditor group said it was understood that New General Motors equity interests and the proceeds of the term loan lawsuit would be available for distribution to general unsecured creditors.

However, the committee said the proposed plan does not specify whether the Treasury or the unsecured creditors are the beneficiaries of the term loan lawsuit proceeds, at the Treasury's request.

While it has now filed another lawsuit to resolve this dispute, the committee said the disclosure statement does not adequately address the potential impact on unsecured creditors if the court rules that the Treasury should benefit from the lawsuit proceeds.

The committee said the disclosure statement should be amended to include a current form of a general unsecured creditor trust agreement, reveal who will manage the claims reconciliation process for the trust, include a proposed wind-down budget and give more information on the size of the claims pool and the impact to unsecured creditor recoveries pending determination of who benefits from the term loan litigation.

Wilmington Trust objection

According to the Wilmington Trust objection, the indenture trustee has been trying to ensure that the estate's budgeted cash position is enough to fund an orderly wind-down, claims reconciliation and distribution process.

Absent adequate cash, Wilmington Trust said the administrator of Motors Liquidation's plan could be forced to sell the new GM securities to fund the wind-down, compromising recoveries to unsecured creditors.

Wilmington Trust said its concern was resolved under an agreement with the Treasury, the company and the unsecured creditors committee.

Under the agreement, the Treasury agreed to ensure the sufficiency of its proposed wind-down financing by increasing the available funds to $1.175 billion from $950 million and providing a wind-down facility that would mature after the claims reconciliation and distribution process and after the liquidation of the company's assets.

However, the trustee said the disclosure statement "would eviscerate this deal insofar as the plan proposes to pay the wind-down facility on the effective date of the debtors' plan."

Wilmington Trust said the disclosure statement gives no information to creditors regarding how much money will be left behind to fund the wind-down and no clear mechanism for the funding if the undisclosed budget is not enough.

A hearing is scheduled for Thursday.

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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