Judge OKs GM bankruptcy
Tuesday, June 2, 2009
NEW YORK -- A bankruptcy judge ruled Monday that General Motors Corp. can have immediate access to $15 billion in government financing and set a hearing on the proposed sale of the bulk of the automaker's assets to take place in just 30 days.
Noting that time is of the essence, U.S. Judge Robert Gerber gave interim approval to the Detroit-based automaker's use of a total of $33.3 billion in financing, with the $15 billion available for use over the next three weeks.
Gerber will rule on final approval of the total amount of financing June 25.
General Motors' filing for Chapter 11 bankruptcy protection Monday is the fourth-largest in U.S. history and the largest for an industrial company. The company said it has $172.81 billion in debt and $82.29 billion in assets.
As it reorganizes, GM will rely on billions of additional financial assistance from the Treasury Department and Canada. That's on top of about $20 billion in taxpayer money GM already has received in the form of low-interest loans.
The judge also set GM's sale hearing for June 30, putting the automaker on a path similar to that of rival Chrysler LLC, which held its sale hearing about 30 days after filing for Chapter 11.
Judge Arthur Gonzalez late Sunday issued a ruling approving the sale of most of Chrysler's assets to a group led by Italy's Fiat Group SpA and the company could emerge from court oversight soon.
Objections in GM's case are due on June 19, with any competing bids required to be submitted by June 22.
Harvey Miller, an attorney for GM, stressed the magnitude of the case and the importance of moving GM through court oversight as fast as possible. He noted that the automaker only has about $2 billion in cash left.
"How many consumers would like to buy a vehicle if the specter of bankruptcy is looming over," Miller said in his opening statement. "If there's going to be a recovery of value, it's absolutely crucial that a sale take place as soon as possible."
As part of GM's restructuring plan, the automaker wants to sell the bulk of its assets to a new company in which the U.S. government will take a 60 percent ownership stake. The Canadian government would take 12.5 percent of the New GM, with the United Auto Workers getting a 17.5 percent share and unsecured bondholders receiving 10 percent. Existing GM shareholders are expected to be wiped out.
Gerber set a strict and speedy tone early on in the hearing. During a motion to require the approval of certain expenses and a restriction barring first-class flights, an attorney participating over the phone jokingly asked "what about private jets?"
The comment was in reference to the company's earlier use of a corporate jet to fly former Chief Executive Rick Wagoner to Washington to ask Congress for aid, which resulted in a firestorm of negative publicity.
"If anybody cracks any jokes I'm going to disconnect the phones," Gerber snapped. "This is serious to a lot of peoples' lives and I'd think that people here would understand that."
Also at Monday's hearing, Gerber approved motions allowing the company to pay certain prebankruptcy wages, along with supplier and shipping costs.