On June 1, 2009, General Motors Corporation (“GM”) filed for Chapter 11 bankruptcy protection in the Bankruptcy Court of the Southern District of New York (the “Court”). Pursuant to numerous first day motions filed by GM, the Court has entered various orders relating to the administration of this bankruptcy proceeding. Of particular significance to GM’s suppliers are the following:
1. Deadlines Relating to the Assumption of Supplier Contracts.
The Court has entered an order approving the procedures to sell the key assets of GM to the New GM. More importantly to GM suppliers, the order establishes the procedures for the assumption and assignment of suppliers’ contracts to GM. As provided in our earlier advisory, the assumption of a supplier’s contract with GM is critical because, if that occurs, it means that the supplier will be paid in full for amounts due, including pre-petition amounts, and is a bar to preference claims. Please note, however, for those who were also suppliers to Chrysler, the procedures in the GM proceeding for the assumption of contracts will be different from those used in the Chrysler proceeding.
It appears that a Notice, like in the Chrysler proceeding, will be sent on or before June 5, 2009 to GM suppliers whose contracts intend to be assumed and assigned. The Notice will not identify which of your contracts will be assumed nor will it identify the amounts GM intends to pay you in order to bring the contracts current (the “Proposed Cure Amount”). Instead, you will be given a pass code to access a secure website in order to examine which of your contracts are to be assumed and the Proposed Cure Amount related to each contract. However, if your records do not agree with the amount listed as the proposed Cure Amount it is important that your company timely files an Objection to the Notice (the “Objection”) with the Court and also sends it to certain interested parties. The Objection must be filed quickly; i.e., within ten (10) days of the date on the Notice. According to sources close to the situation, the amounts on GM’s eDacor system should correspond with the Proposed Cure Amount. As such, it is critical that your company be vigilant in making sure that the Notice once received is forwarded to the proper parties so that the matter can be promptly reviewed and an Objection filed timely if needed. If an Objection is not timely filed, you will be forever barred from challenging the Notice and the Proposed Cure Amount. If your company does not receive the Notice by June 6, 2009, we urge you to contact your GM buyer immediately to inquire if your contracts are being assumed and how you can gain access to the secured website. If you delay in taking this action, you may be unable to file an Objection, if necessary, in a timely fashion. Unfortunately, unlike the Chrysler proceeding, the list of contracts to be assumed will not be made public so Masuda, Funai will not be able to access the list to provide you advance notice that your company should be receiving a Notice.
2. Deadline Has Been Set to File Claims for Shipments within 20 Days before the Bankruptcy Proceeding.
The Court has ordered that all claimants seeking to be paid for goods received by GM within 20 days prior to June 1, 2009 submit a proof of claim setting forth the value of those goods and must also provide documentation such as invoices, receipts and bills of lading, which identify the goods for which the supplier seeks payment. A supplier must also submit documentation reflecting the date when such goods were shipped to and received by GM.
Time is of the essence in submitting this type of claim, particularly within the context of this large bankruptcy. Specifically, all such claims must be submitted on a pre-approved bankruptcy form on or before June 20, 2009.
If you have recently shipped and not been paid for goods sold on credit to GM and believe you may be entitled to make such a claim, please gather the documentation reflecting the shipment and receipt of such items, and contact Masuda Funai for further assistance.
3. Appointment of Suppliers as Critical or “Essential” Vendors.
The Court has allowed GM to make payment on pre-petition claims to certain critical or “essential” vendors with which GM does business. On or about June 1, 2009, GM sent a proposed letter agreement to the suppliers which GM deems critical. The Court has given GM the discretion as to which vendors to designate and not all vendors will be designated as critical vendors. There will be no list published. Therefore, if you did not receive a proposed letter agreement, you should contact the supplier call center of your GM buyer to inquire if you have been designated. Please note that the letter agreement would significantly change the terms and conditions with which you conduct business with GM. As such, the letter agreement should be closely reviewed and analyzed before it is executed. In the event that GM contacts you to enter into such an agreement for such status and payment, feel free to contact our office to assist in reviewing and advising on any proposed agreement.