General Motors must win approval to sell its best assets to a new government-financed company by July 10 or risk losing its bankruptcy financing, a Treasury Department official testified on Wednesday.þþHarry J. Wilson, a member of the Obama administration’s auto task force, said in United States Bankruptcy Court in New York that the government’s loan to G.M. expired July 10. If the carmaker — now in its second day of hearings to approve the sale — fails to complete the transaction by then, the administration does not intend to extend the loan by even one day, he said.þþ“We have no intention to further fund this company if the sale order is not entered by July 10,” Mr. Wilson said. “It’s better to cut one’s losses.”þþHe also said he expected an initial public offering of a new G.M. stock sometime next year.þþLater in the day, Harvey R. Miller, G.M.’s chief bankruptcy counsel, warned that the company had no alternative to the proposed sale. “No other entity can compete with the price offered by the purchaser,” he said, referring to the government.þþThe tight timeline underscores the speed with which G.M. and the Obama administration are seeking to create a slimmed-down G.M. through the bankruptcy court. Using Section 363 of the federal bankruptcy code, the carmaker would place desirable brands in a new company owned largely by the American and Canadian governments and a health care trust for the United Automobile Workers union. þþThe new G.M., which would continue to be led by Fritz Henderson, would leave behind several undesirable sets of claims in bankruptcy court, including asbestos litigation and some product liability claims.þþIn his court testimony on Wednesday in New York, Mr. Wilson — formerly a senior executive of Silver Point Capital, a hedge fund specializing in distressed-debt investments — described some of the negotiation process that shaped G.M.’s bankruptcy case. The administration’s auto task force had decided upon an asset sale plan by mid-May, as G.M. began a debt-exchange offer with its bondholders as part of a government-supported restructuring plan. þþBy pursuing an asset sale, G.M. could be assured of greater speed, certainty and the ability to shed unwanted liabilities, Mr. Wilson said. þþBecause the government was essentially G.M.’s lender of last resort, it could effectively dictate what it found acceptable as a turnaround plan, Mr. Wilson testified. þþBy the end of Wednesday’s hearing, Judge Robert E. Gerber had heard closing arguments from several parties, including G.M. and a number of opponents to its sale plan, as well as lawyers for asbestos litigants and accident victims. Other parties, including an unofficial committee of dissident G.M. investors holding about $2.3 million worth of bonds, are scheduled to deliver their statements on Thursday.þþIn his closing arguments, Mr. Miller noted that the company’s sale proposal received more than 800 objections. But none had proposed a credible alternative plan, he said, leaving liquidation as the only other possibility, and one he described as “draconian.”þþBut several of the plan’s opponents criticized it as unfairly circumventing their rights as creditors, something G.M. and the government planned from the beginning. þþAnd because G.M. is selling assets to a new government-backed company — as opposed to a third party, as Chrysler did in its asset sale to a Fiat-run entity — a number of these opponents argue that its turnaround plan was negotiated in bad faith.þþ
Source: NY Times
