Late last night, after presiding over a three-day hearing on the matter last week, U.S. Bankruptcy Judge Robert Gerber of the U.S. Bankruptcy Court for the Southern District of New York issued an order authorizing the sale of substantially all of the assets of General Motors Corporation (“Old GM”) under Section 363 of the Bankruptcy Code (“Section 363 Sale”). Pursuant to the Amended and Restated Master Sale and Purchase Agreement, by and among Old GM and its debtor subsidiaries and NGMCO, Inc. (“New GM”), the successor-in-interest to Vehicle Acquisition Holdings LLC (the purchasing entity sponsored by the U.S. Treasury Department), New GM will acquire assets of GM free of bankruptcy claims, while leaving behind other assets in Old GM to be liquidated or settled in court. Judge Gerber also approved the assumption and assignment of executory contracts and the settlement with the United Auto Workers (UAW) by which GM will satisfy obligations to approximately 500,000 retirees. Following consummation of the sale, the U.S. Treasury will hold 60.8% of New GM’s common stock, the Canadian and Ontario governments will hold 11.7%, the UAW Retiree Medical Benefits Trust will hold 17.5%, and the remaining 10% stake will be held by bondholders and other unsecured creditors of Old GM.
With the exception of a few limited classes of objections, Judge Gerber overruled all outstanding objections to the Section 363 Sale, including those from dissident bondholders and liability claimants who had claims pending before Old GM filed for bankruptcy on June 1, 2009. In his decision, Judge Gerber stated that the Section 363 Sale is intended to “preserve the going concern value [of GM]; avoid systemic failure; provide continued employment; protect the many communities dependent upon the continuation of GM’s business, and restore consumer confidence.” Judge Gerber ruled that property “can be sold free and clear of successor liability claims.” However, while New GM will not assume any Old GM liabilities for injuries or illnesses that arose prior to the Section 363 Sale, it will voluntarily assume liability for warranty claims, and for product liability claims asserted by those injured after the Section 363 Sale, regardless of when the vehicle was manufactured. In reference to a liquidation analysis prepared with respect to GM’s alternatives, Judge Gerber stated that liquidation would be “a disastrous result for GM’s creditors, its employees, the suppliers who depend on GM for their own existence, and the communities in which GM operates,” while “unsecured creditors would recover nothing.”
In its press release, GM stated that GM’s subsidiaries outside of the U.S. “will be acquired by the new company and are expected to continue to operate without interruption.”