Former GM trust wins approval to settle Nova Scotia notes litigation

By Caroline Salls

Pittsburgh, Oct. 21 - The Motors Liquidation Co. GUC Trust received court approval of a settlement of litigation targeting the disallowance, equitable subordination or reduction of claims filed in the Motors Liquidation Co. bankruptcy cases by or on behalf of the holders of notes issued by General Motors Nova Scotia Finance Co., according to an Oct. 21 filing with the U.S. Bankruptcy Court for the Southern District of New York.

In 2003 General Motors Nova Scotia issued 8 3/8% guaranteed notes due Dec. 7, 2015 and 8 7/8% guaranteed notes due July 10, 2023.

The terms of the settlement include the following:

• The allowance of a $1,073,000,000 general unsecured claim against the Motors Liquidation estate in favor of the holders of the Nova Scotia notes, based upon the company's guarantee of the notes. A total of $616.22 million will be allocated to 2015 noteholders and $456.78 million to 2023 noteholders;

• The reduction of a $1,608,000,000 claim filed by Green Hunt Wedlake, Inc. as trustee for General Motors Nova Scotia Finance to $477 million and the allowance of that claim as a general unsecured claim against the Motors Liquidation estate. Of the reduced amount, $273.94 million will be allocated to the 2015 noteholders and $203.06 million to the 2023 noteholders;

• The payment by General Motors of Canada Ltd. of $50 million in cash to the trustee, to be applied in part to pay $17.5 million of fees and expenses of General Motors Nova Scotia mediation parties, plus any additional amounts owed by General Motors Nova Scotia Finance to the Canadian Office of Superintendent of Bankruptcy, with the remainder to be distributed to the holders of the notes, with 57.43% to be allocated to holders of the 2015 notes and 42.57% to holders of the 2023 notes; and

• Various releases from liability by all past, present and future holders of the notes and the other settlement parties.

Special distributions

The settlement also requires the GUC trust to make a special distribution of common stock of General Motors Co., warrants to purchase GM common stock and units of beneficial interest in the GUC trust to noteholders of record as the beneficial holders of the allowed portions of the guarantee claim and the wind-up claim.

In addition, the trust must make a special distribution of excess distributable assets to all holders of record of GUC trust units as of a date to be set after the initial distribution.

The initial distribution will consist of 6.17 million shares of GM common stock, 5.61 million warrants to acquire GM common stock at an exercise price of $10.00, expiring July 10, 2016, 5.61 million warrants to acquire GM common stock at an exercise price of $18.33, expiring July 10, 2019, and 1.55 million GUC trust units.

Also, if any assets become available for distribution to holders of general unsecured claims against the Motors Liquidation estate in connection with litigation between the company's official committee of unsecured creditors and JPMorgan Chase Bank, NA, those distributions will be made to the holders of the Nova Scotia notes as the beneficial holders of the allowed portions of the guarantee claim and the wind-up claim.

Motors Liquidation was formerly General Motors, 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. Motors Liquidation's Chapter 11 case number is 09-50026.

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