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Politics : Politics for Pros- moderated
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To: Bearcatbob who wrote (474467)2/29/2012 4:01:50 PM
From: rich evans  Read Replies (2) of 794220
 
Bob, That is a complicated question.

When GM went bankrupt, there was noone except the goverment to keep it operating. The gov did this with DIP financing which has first/super priority for repaying in B/R.

Then Trustee then sold all the good assets of GM free and clear uner a 363d transaction to a new owner which turned out to be the GOV. The proceeds from the sale would go to the creditors holding liens on the assets sold with the GOV in first position with its DIP financing. The proceeds were much less then what was owed. The bond holders took some stock in the new GM for part of their claims and probably took debt in the new GM also.

The remaining assets not sold stayed in B/R but the value is less then the cleanup liability.

The new GM owned by the GOV negotiated with the Union and the Bondholders. The Union gave up their pension claims which the Gov would have had to pay under the Pension Guarantee Board for stock in the new GM. This was all done on a prepackaged deal and was heavily fought and argued over in front of the B/R judge over many hearings. The key question asked by the judge to the objectors was what is your alternative and of course they had none. The Union negotated new labor agreements and pension agreements with the new GM as well.

The unsecured creditors had no rights as the proceeds from the 363d sale was less then the amount owed the DIP and secured bonds. Look up 363d in Chapter 11 of the BR code.

Rich
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