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GM Liquidation Terms Delayed After Creditors Complain


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GM Liquidation Terms Delayed After Creditors Complain

November 22, 2010, 1:55 PM EST

By Tiffany Kary

(Updates with agreement on asbestos evidence in fourth paragraph.)

Nov. 22 (Bloomberg) -- A month after General Motors Corp.’s unwanted businesses won conditional approval for their bankruptcy liquidation terms, resolution has been delayed again by disputes between creditors and the U.S.

U.S. Bankruptcy Judge Robert Gerber in Manhattan today scheduled another hearing on Dec. 2 after attorneys for the government and creditors said they’d failed to agree on the budget for the trusts in the wind-down of the now-defunct part of the carmaker. A creditors’ lawyer, Thomas Moers Mayer, said creditors and the U.S. Treasury disagree on several other issues as well in the largest manufacturing reorganization in history.

“If we can’t reach an agreement on Dec. 2 or shortly thereafter, we will ask your honor for court time in January to deal with issues of principle,” Mayer said.

Separately, creditors agreed to limit their probe of asbestos data to the bankrupt estate and new General Motors.

Creditors had previously sought data from trusts of other companies that had settled asbestos claims, saying they needed more information such as the age, work history and diagnosis of claimants in order to estimate the scope of liability claims for mesothelioma, a deadly cancer.

‘Asbestos Wars’

“This effort to move the asbestos wars into my courtroom and fight agendas here has the result of delaying distribution to literally thousands of innocent creditors,” Gerber said.

A lawyer for the bankrupt estate, Stephen Karotkin, said thousands of dollars for the estate’s wind-down budget has already been spent on disputes over how to protect the identity of individuals in the asbestos probe. The U.S. and Canada set aside a wind-down budget for General Motors Liquidation Co. as part of a plan that repays their loans to GM.

David Jones, a lawyer for the U.S. attorney’s office, told Gerber that the pace of talks with creditors is frustrating. Karotkin said the chief sticking point was the budget for a trust that would distribute stock and warrants in new GM to creditors.

Other trusts in the wind-down include one to set aside $773 million to resolve environmental claims by the federal government and 14 states. A mix of cash and assets, put into trusts, would cover cleanup at 89 properties, with more than half the money going to New York and Michigan.

GM has also said it plans to set up a trust to pay tort claims. While the estate recorded an estimate of $648 million for asbestos liability, a committee of creditors said in a court filing the estate may face claims for five to 10 times as much.

‘Redouble Your Efforts’

“Why don’t you guys redouble your efforts to put these issues to bed,” Gerber told the lawyers.

On Oct. 21, Gerber gave his conditional approval to the disclosure statement, which describes the terms of liquidation and allows creditors to vote on it. At that hearing, he turned aside objections by creditors who claimed they lacked enough information about issues such as the size of asbestos and personal-injury claims.

When GM filed for bankruptcy in June 2009, it sold its more valuable assets to a newly formed company that has since gone public. Unwanted properties were left under bankruptcy protection. A plan for Old GM first filed in August proposed giving stock and warrants in new GM to satisfy the claims of unsecured creditors.

The case is In re Motors Liquidation Co., 09-50026, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

--Editors: Fred Strasser, Mary Romano

link:

http://www.businessweek.com/news/2010-11-22/gm-liquidation-terms-delayed-after-creditors-complain.html

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