Could GM’s Bailout Be Wiped Out?
Interesting read at the Washington Free Beacon. Remember all those GM bond holders who Obama and the UAW screwed over during the forced bankruptcy in 2009?
Well, they’re suing in a New York Court, and it looks like they just might win.
A New York federal judge may rule imminently on a case that could reverse the General Motors (GM) bailout and send the company back into bankruptcy, according to sources close to the case.
At issue is a backroom deal hatched by GM to fulfill the Obama administration’s demand for a quick bankruptcy, draining the automaker of nearly all of its cash on hand and leaving it in worse shape than it was when it collapsed in 2009.
One condition of GM’s bailout was to shore up its overseas subsidiaries. On the eve of entering bankruptcy, the company cut a $367 million “lock-up agreement” with several major hedge funds to prevent GM Canada from failing. The agreement ensured that GM could spin-off its liabilities to “old GM,” while using a multi-billion dollar bailout to create a new company.
All of that could be reversed if bankruptcy Judge Robert Gerber reopens the process and rules in favor of old GM trustees, who are suing the hedge funds at the center of the lockout agreement.
“In this particular situation, there’s $1.3 billion in liabilities, but that’s just what’s officially back on the table if the court rules for old GM,” said a bankruptcy expert close to the negotiations. “If those go back on the table then everything could be back on the table and [new GM] would have to address them.”
How is the “New GM” doing?
Well, this is never a good sign.
Negotiators representing both sides of the case met in New York on Thursday to try to settle the suit through mediation rather than a court order.
“They’re feeling pretty good about it,” said an industry insider who spoke to one of the hedge fund negotiators on Thursday.
Judge Gerber was the one who initially decided on the bailout, pretty much rubber stamping the deal without looking at the facts regarding “New GM’s” treatment of “Old GM’s” creditors. If this thing gets re-opened, it is not going to be pretty financially, politically, and six other ways til Sunday.