Life & Style | Motoring
New GM will return with up to $73b in equity
General Motors Corp., which is preparing to sell its best assets to a streamlined new entity, will carry with it liabilities of $48.4 billion (Dh178 billion), a bankruptcy judge said.
- Bloomberg
- Published: 22:45 July 9, 2009
New York: General Motors Corp., which is preparing to sell its best assets to a streamlined new entity, will carry with it liabilities of $48.4 billion (Dh178 billion), a bankruptcy judge said.
The new GM agreed to take on those obligations to benefit creditors, US Bankruptcy Judge Robert Gerber in New York said on Tuesday. They will be offset by GM's most competitive assets, such as Cadillac, Chevrolet, Buick and GMC.
Gerber previously approved the sale of most of GM's business to a US Treasury-funded buyer and said the company could complete the deal any time soon. The Treasury has set a July 10 deadline for the sale.
Detroit-based GM entered bankruptcy court on June 1 reporting global liabilities of $176.4 billion as of December 31.
The old GM will be left with GM's remaining obligations and unwanted assets, including contaminated factory sites, a parking lot in Flint, Michigan, and a nine-hole golf course in New Jersey.
Gerber ruled on July 7 that asbestos and accident victims could not block the sale or take their opposition directly to an appeals court, bypassing the intermediate district court.
He said in a written decision that if GM were forced to liquidate because an appeal blocked the sale, creditors could lose $66.6 billion in value.
By contrast, the equity of the new entity, if the deal goes through, would be from $63 billion to $73 billion, with 10 per cent of that going to unsecured creditors including accident victims, according to the judge.
Attorneys for the Treasury said the claimants should be forced to post a bond of at least $7.4 billion to protect GM and its other creditors if they were allowed to block the deal for any significant period.
GM estimated future product liability claims at $934 million and asbestos-related tort claims at $627 million as of March 31, according to its most recent quarterly report..
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