Feds: No More Dough if GM Bankruptcy Not Final by July 10
By Michelle Krebs July 3, 2009By Bill Visnic
It may not come exactly on the Fourth of July, but the Obama administration is directly threatening some of its own fireworks -- the financial kind -- if the ever-quickening pace of General Motors Corp.'s bankruptcy procedure isn't concluded by July 10.
That's barely six weeks since the automaker filed for Chapter 11 bankruptcy protection on June 1.
In testimony in the hearing to determine whether GM can sell its assets to a newly formed "good" GM, an official from the U.S. Dept. of Treasury overseeing the GM restructuring said, "We have no intention to further fund this company if the sale order is not entered by July 10," the Associated Press reported.
On Thursday, an attorney for a group of investors opposing the process called on the bankruptcy judge, U.S. Judge Robert Gerber, to resist the apparent threat, saying the government has no intention of cutting off GM's financial lifeline. He said the threat amounted to nothing more than bluster to assure the rush of the proceedings that will deny opponents' rights.
Michael Richman, who represents three bondholders resisting GM's Chapter 11 maneuverings, was quoted by the AP as saying, "The court should draw the line and say that this transaction goes too far. This (resisting the threat of withdrawn government funding) sends a powerful message that even in the bankruptcy courts of the country's commercial capital there are limits and that rights and due process are not to be sacrificed."
If GM's Section 363 procedure of the U.S. Bankruptcy Code is approved by Gerber, GM will sell its assets to a new company that will continue with the automaker's operations, while leaving the company's liabilities and non-profitable facilities and operations with the "old" GM that will be responsible for handling almost all future financial claims against the company from previous investors and lenders.
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