GM Bankruptcy Leaves Opponents with Few Options

After only three days of court hearings last week, U.S. Bankruptcy Judge Robert Gerber has cleared the way for a quick sale of General Motor’s viable assets to the federal government.

An attorney representing a relatively small contingent of bondholders who argued against the bankruptcy in court last month has stated that his clients will not challenge the ruling claiming that the overwhelming legal cost of opposing GM and the federal government would make such a fight unproductive.

Assuming that other opponents remain silent, GM could emerge from bankruptcy within a month. In fact, according to a spokesperson for the U.S. Treasury, barring any other product liability claims or opposition by other bondholders, the sale could be finalized as early as this Friday and clear the way for GM to submit their reorganization plan to the court.

Although many bondholders have signaled that they will not appeal Judge Gerber’s decision to allow GM to sell its viable assets, they and their attorneys still believe they have a strong case. 

Attorney Michael Richman, who represents three clients hold $2.3 million of GM debt collectively, stated that his clients feel the financial down-side of fighting the sale would outweigh the potential rewards. He also claimed that other bondholders of an estimated $500 million in debt had expressed similar feelings concerning the potential for appealing the decision.

‘It’s disappointing,’ said Richman in an interview, ‘I’d like to carry on the case.’ He went on to express optimism that the appeals process could have a different outcome from the Chrysler bankruptcy case, ‘because [in the case of GM] there’s no Fiat buying the company to run it.’

Even if bondholders stay on the sidelines, there are numerous tort claimants with product liability and accident claims against the automaker who could still appeal the sale in order to get more money from GM, although that seems unlikely.

Attorney Barry Bressler, who represents clients with liability claims against GM said, ‘As far as the court is concerned, they’d like to see this case barrel through.’

Under the bankruptcy ruling, past claimants, including Bressler’s clients, are forced to seek recovery from the old GM which will make it harder for bondholders to collect their money.

Along with 10% stock in the new GM and warrants to purchase an additional 15% in the future, the old GM will receive $1.25 billion for administrative fees. With product liability claimants first in line to receive judgments against the old GM, bondholders will have to wait their turn to be paid back. 

Attorney Michal Richman asserts that once product- and injury-liability claimants deplete old GM’s $1.2 billion funding, the company will be forced to sell its stock in order to cover the costs of litigation along with other costs involved in liquidating the company’s assets.

In short, both tort claimants and bondholders face a lengthy and expensive process which, over time, will offer diminishing returns.  According to Bressler, ‘It will take a long time, it will be expensive and we’re not sure how much we’d get.’

Posted in In the News

Search for a vehicle

About Us  |    Contact Us  |    Terms of Use  |    Privacy Policy  |    Auto Dealer Marketing  |    Site Map

©2016,, LLC All rights reserved.