Monday, July 6, 2009

GM's Bankruptcy to be "Expedited" Through Kangaroo Proceedings

Last night, the day after the fourth of July - and a Sunday - Judge Robert Gerber, a federal bankruptcy judge for the Southern District of New York, penned an opinion which approved the sale of Old GM's viable assets to New GM. The sale will proceed pursuant to Section 363 of the Bankruptcy Code; a section that specifically calls for an "expedited" process when, basically, it can be shown that a lengthy visit to bankruptcy would be particularly destructive to the value of the failed entity. Section 363 is also especially convenient in the event that a Government - let's say of the Federal variety - wishes to avoid the rather Inconvenient issues of creditor's rights and the like that would arise under a more prolonged set of proceedings. Of course, the latter explanation is purely speculative in nature.

We've included the full text of the order below, as we found it to have some significant humor value; primarily this is the product of Judge Gerber's stating of obvious circumstances in very candid terms, for example:

"Importantly, the DIP financing to be furnished by the U.S. Treasury and EDC is the only financing that is available to GM. The U.S. Treasury (with its Canadian EDC is the only entity that is willing to extend DIP financing to GM. Other efforts to obtain such financing have been unsuccessful."

"While the Liquidation Analysis projected some recoveries for secured debt and administrative and priority claims, it concluded that there would be no recovery whatsoever for unsecured creditors. The Court has no basis to doubt those conclusions. The Court finds that in the event of a liquidation, unsecured creditors would recover nothing."

"In Chrysler, Judge Gonzalez discussed at great length the evolution of the law in this area and its present requirements,28 and this Court need not do so in comparable length. " *way to throw Judge Gonzalez under the bus for creating a skewed set of precedent

"Bondholder Parker (so far as the Court can tell, the only one of the 850 objectors) objects to the 363 Transaction on the additional ground that the U.S. Government was not authorized to use TARP funds to assist the auto industry, and hence that the 363 Transaction is unlawful. The Court agrees with the United States Attorney that the issue of the U.S. Treasury’s lending authority now is moot, and that Mr. Parker lacks standing to raise the issue. Thus the Court does not need to reach the third issue." *a nice bit of political dodging on Judge Gerber's part; failing to address the argument itself in politician-like fashion.

"Many GM stockholders, understandably disappointed that the 363 Transaction will leave them with no recovery, have voiced objections. Once again, the Court is sensitive to their concerns, but cannot help them. GM is hopelessly insolvent, and there is nothing for stockholders now. And if GM liquidates, there will not only be nothing for stockholders; there will be nothing for unsecured creditors. Under those circumstances, GM stockholders cannot claim to be aggrieved by the transactions before the Court here."

In case anyone glazed over the section above, a federal bankruptcy judge has referred to GM as being "hopelessly insolvent". Not only is this funny, but it is also extremely obvious in light of the fact that the US Government was the only entity willing to offer DIP financing to GM. This little fact arose in Judge Gerber's opinion, and explains why the SDNY is no more than President Obama's puppet at this point; the federal Government has stated it's willingness to provide DIP financing only in the event that the bankruptcy proceed according to Section 363, leaving the Court without any real voice of it's own. Judge Gerber did give appearing independent the old college try though.

Sphere: Related Content

No comments:

Post a Comment