Former GM to transfer assets to four trusts under Chapter 11 plan

By Caroline Salls

Pittsburgh, Sept. 1 - Motors Liquidation Co., formerly General Motors Corp., filed a Chapter 11 plan and related disclosure statement Tuesday with the U.S. Bankruptcy Court for the Southern District of New York that "creates a framework for resolving the challenges of one of the most complex Chapter 11 cases in U.S. history," according to a company news release.

"The focus of our small, lean team at MLC has been to work closely with federal and local governments, regulatory bodies, local communities and creditors to develop a plan that comprises environmental remediation, asset liquidation and claims resolution, all on a very large scale, and to do so in very short period of time," Motors Liquidation chief executive officer Al Koch said in the release.

"We not only have been successful in doing that, but we have also developed unique processes and approaches that could serve as templates for other big bankruptcies in the future. In both regards, what has been accomplished here is historic."

Upon confirmation of the plan, substantially all of the company's assets and liabilities will be transferred to four trusts, including the Environmental Remediation Trust, that provides funds for the continuing environmental remediation of Motors Liquidation's remaining properties and the General Unsecured Creditors Trust, which will be responsible for resolving the outstanding unsecured claims and distributing General Motors Co. common stock and warrants owned by Motors Liquidation to those unsecured creditors.

Motors Liquidation said it currently owns 10% of General Motors' common stock, plus warrants that are exercisable for a further 15% of GM common stock. Motors Liquidation will be issued up to an additional 2% of General Motors' common stock if the final estimated total amount of unsecured claims exceeds specified thresholds.

A third trust will handle both present and future asbestos-related claims, while a fourth trust will deal with litigation-related claims.

Key environmental trust

The company said the environmental trust is one of the most significant aspects of the plan, as it would make $536 million available to handle environmental-remediation activities at the remaining properties.

"A significant number of these properties are old industrial sites that have a need for substantial environmental remediation," Motors Liquidation executive vice president Ted Stenger said in the release.

"It is nearly impossible to redevelop such properties for productive, job-creating purposes unless environmental remediation is complete or the buyer can be assured the funding and procedures exist to do the remediation.

"The plan establishes a framework that will provide this assurance."

According to the release, the environmental trust's assets will include cash, the remaining unsold properties and the equipment located at those properties.

Motors Liquidation said this trust differs from the structure that has been used in some other large environmental bankruptcies in that it provides an overall "national" remediation solution backed up by significant funds, while also providing a strong voice to the states involved in the process.

The company expects most of the properties transferred to the trust to be sold to third parties or otherwise prepared for redevelopment within a few years.

In fact, Motors Liquidation said it has already received a number of expressions of interest regarding properties and is in negotiations to sell 17 properties, in addition to those already sold.

The company said it expects the majority of the environmental remediation related to the trust to be completed or well underway within five years. The trust will have enough funding to complete further remediation, such as periodic site testing and maintenance, for up to 100 years.

Confirmation target

Motors Liquidation said it has set a first-quarter 2011 target for plan confirmation.

The majority of the company's unsecured claims should be resolved within the first two years after confirmation.

Creditor treatment

According to the disclosure statement, treatment of creditors will include:

• Holders of administrative expense claims, priority tax claims, debtor-in-possession credit agreement claims and priority non-tax claims will be paid in full in cash;

• Holders of secured claims will either be paid in full in cash, receive the proceeds from the sale of the collateral securing the claim, receive the collateral or have their claims remain unaltered;

• Holders of general unsecured claims will receive from the general unsecured trust a share of new GM securities and general unsecured trust units.

Also, to the extent these creditors are entitled to proceeds from a term loan avoidance action and asbestos insurance assets, they will receive a share of those proceeds;

• Holders of property environmental claims will be treated in accordance with environmental trust and consent decree and settlement agreements;

• Asbestos personal injury claims will be channeled to an asbestos trust and be treated in accordance with trust distribution procedures; and

• Holders of equity interests will receive no distribution.

GM, a Detroit-based automaker, 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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