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GM estate wins court approval of liquidation terms

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GM estate wins court approval of liquidation terms

December 9, 2010 - 12:01 am ET

NEW YORK (Bloomberg) -- General Motors Corp.'s unwanted businesses in bankruptcy won approval of liquidation terms from a judge who overruled objections by Onondaga County, New York, over environmental contamination.

Other disputes can be resolved at a March 3 hearing to confirm the plan, U.S. Bankruptcy Judge Robert Gerber said this week in Manhattan as he approved the so-called disclosure statement, allowing creditors to vote on the largest manufacturing reorganization in history.

“As I've said 900 times, the purpose of a disclosure statement isn't to address any individual constituents' problems,” Gerber said. He ordered that language be added saying that a trial to estimate asbestos liabilities should be completed before the plan is implemented, and that a claims representative will work on the issue if it isn't.

Gerber gave provisional approval of liquidation terms on Oct. 21. An agreement with creditors and the U.S. Treasury resolved most remaining objections last week. Onondaga County said its claim over PCB contamination from a GM facility wasn't properly addressed in the disclosure statement.

Other objections came from Appaloosa Management LP, Aurelius Capital Management LP, Elliott Management Corp. and Fortress Investment Group LLC, which hold notes issued by General Motors Nova Scotia Finance Co. The noteholders said in Oct. 14 court papers that the plan doesn't show that a claim of $1.61 billion made by a trustee for the Nova Scotia subsidiary and a separate guarantee claim of $1.07 billion will be allowed.

Lack of information

A lock-up agreement made by Motors Liquidation Co. obliges the company to allow both claims, lawyers for the group wrote. They said the plan lacked information that they needed to vote.

The town of Salina, New York, which seeks $41 million for environmental contamination from GM's operations before its bankruptcy, said the cost of participating in the bankruptcy is likely to exceed the value of what it recovers.

Taxpayers “are to receive some unknown non-cash amount, so that they will be left ‘holding the bag' with no ability to fund the required clean-up,” lawyers for the town wrote.

A representative for future asbestos claimants also objected, saying Motors Liquidation Co. had set aside $660 million for present and future claims for asbestos damages.

That amount is only a reserve for a 10-year period, and the estate's liability “may be much higher” that the reserve, lawyers for the asbestos claimants wrote.

Asbestos exposure

“Because of the nature of exposure to asbestos-containing products, there are people who have been exposed to such products that have not yet manifested a disease but may do so in the future,” they added.

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.

When General Motors Co. went public Nov. 18, creditors, who were issued rights to about 150 million shares to cover an estimated $37 billion in claims, would have had stock worth about $5.1 billion.

Read more: http://www.autonews.com/article/20101209/OEM/101209824/1424#ixzz17eotZIr3

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