GM MOTORS: Business Bankruptcy Headlines

GM MOTORSGeneral Motors Chapter 11 Petition Filed
General Motors filed for Chapter 11 protection with the U.S. Bankruptcy Court in the Southern District of New York, case number 09-50026. The Company is represented by Stephen Karotkin of Weil, Gotshal & Manges. On May 31, 2009, the Company announced that the U.S. Department of the Treasury had informed it that the support of more than 54% of the bondholders allows the Company to proceed with its previously announced 363 Sale Proposal under U.S. Bankruptcy Court protection. In its filing announcement, the Company states, “[p]ending approvals, the New GM is expected to launch in about 60 to 90 days as a separate and independent company from the current GM (‘GM’), with two distinct advantages: it will be built from only GM’s best brands and operations, and it will be supported by a stronger balance sheet due to a significantly lower debt burden and operating cost structure than before.

The New GM will incorporate the terms of GM’s recent agreements with the United Auto Workers (UAW) and Canadian Auto Workers (CAW) unions and will be led by GM’s current management team.” Under its plan, GM will sell substantially all of its global assets to the New GM. GM will use its cash-on-hand and a new debtor-in-possession financing of approximately $33 billion to ensure an uninterrupted supply of goods and services and provide for other cash requirements prior to closing of the asset sale; fund liabilities to secured lenders and provide contingency funding to handle any potential unexpected needs. Furthermore, in conjunction with the sale, the U.S. Treasury and the Canadian and Ontario governments will provide funds to administer the wind down of the remaining assets and the closing of the Chapter 11 cases. None of GM’s operations outside of the U.S. are included in the U.S. Court filings or Court-supervised process, and these filings have no direct legal impact on GM’s plans and operations outside the U.S. GM announced separately, GM Europe has an agreement for €1.5 billion of bridge financing from the German government and a Memorandum of Understanding to partner with Magna International Inc.

Under the agreement, the Opel/Vauxhall assets have been pooled under Adam Opel GmbH, with the majority of the shares of Adam Opel GmbH being put into an independent trust (the balance to remain with General Motors), while final negotiations with Magna proceed.

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Posted on June 2, 2009, in ANNOUNCEMENT and tagged , . Bookmark the permalink. Leave a comment.

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