- The Washington Times - Saturday, June 20, 2009

NEW YORK | A group of General Motors Corp. bondholders and some of the automaker’s labor unions filed objections Friday to GM’s plan to sell its assets to a new company that can emerge from bankruptcy protection.

Their opposition, along with additional objections filed by consumer groups, a handful of states and cities, and individual retirees, shareholders and bondholders, threatens to put the brakes on what has so far been a speedy trip through the Chapter 11 process.

The Unofficial Committee of Family & Dissident GM Bondholders claim they are being treated unfairly compared with the automaker’s other stakeholders and deserve more than the 10 percent stake in the new company that they would receive if the sale goes through.

In its motion, the bondholders group accused GM and the U.S. government of unjustly speeding the case through the bankruptcy process at the expense of the bondholders and dividing the new company’s assets “among a few select favored classes.”

“GM’s bondholders appear to be the most disfavored and discriminated class in the scheme,” the group wrote, pointing to the larger, 17.5 percent stake the United Auto Workers union is slated to get under the sale.

The group claims to represent about 1,500 bondholders with holdings worth more than $400 million. It’s also asking the court to grant it permission to form a formal committee that would be able to negotiate with GM separately from larger bank and investment firm bondholders. A hearing on that request is scheduled for Tuesday.

GM spokeswoman Renee Rashid-Merem declined to comment on the group’s objection, saying that the company doesn’t discuss specific claims or possible outcomes that will be determined by the bankruptcy court.

As part of GM’s restructuring plan, the automaker wants to sell the bulk of its assets to a new company in which the U.S. government will take a 60 percent ownership stake. The Canadian government would get 12.5 percent of the new GM, with the UAW taking a 17.5 percent share and unsecured bondholders receiving 10 percent. Existing GM shareholders are expected to be wiped out.

The support of bondholders is seen as a key step toward moving the bankruptcy process along quickly and allowing GM to meet its goal of emerging from court oversight in 60 to 90 days.

The day before GM’s June 1 bankruptcy protection filing, a group of ad hoc institutional bondholders said that 54 percent of the automaker’s bondholders had agreed to exchange their shares of the automaker’s $27 billion in unsecured bonds for the 10 percent stake and warrants to purchase a greater stake in the new company later.

Chrysler LLC also tried to hammer out a deal in the days leading to its April 30 Chapter 11 filing, but it faced heavy resistance from debtholders representing a fraction of its $6.9 billion in secured debt.

That group objected to Chrysler’s plan to sell the bulk of its assets to Italy’s Fiat Group SpA, and took the case all the way to the U.S. Supreme Court before the sale ultimately went through. Attorneys for consumer groups and people with product liability lawsuits against Chrysler also appealed the sale to the high court.

Several of the same consumer groups are also objecting to the GM sale, because like in the case of Chrysler, the new company would not be responsible for product liability claims related to vehicles produced and sold by the old company.

Consumers would be left to file claims against the assets remaining after the sale, and it is unlikely that there will be anything left to pay those claims.

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