A U.S. federal judge has approved the sale of General Motors Corp.’s assets to a new government-run company, removing what had been seen as a big obstacle to the American industrial icon’s efforts to exit bankruptcy proceedings, The Wall Street Journal reported Monday.
The ruling, which rejected pleas from dissident bondholders and product-liability claimants, allowing the sale to proceed, was issued late Sunday by Judge Robert E. Gerber of the U.S. Bankruptcy Court for the Southern District of New York, the report said.
The judge said in the 87-page ruling that short of bankruptcy, the alternative would be liquidation, “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. In the event of liquidation, creditors now trying to increase their incremental recoveries would get nothing,” the Journal reported.
Having suspended the objections, the way forward is now open for a government-brokered restructuring, in which General Motors will move its “good” assets, Chevrolet, Cadillac, Buick and GMC, to a new company owned by the U.S. Treasury.
With the wheels in motion, the auto maker could potentially exit bankruptcy proceedings within two months, the report said.
The deal will see the U.S. government take a roughly 61% stake in the new GM after loaning the company more than $50 billion, The Journal reported. The Canadian government, which also helped prop up the company with loans, will get a roughly 12% stake.
A retiree health-care trust for the United Auto Workers union will get a 17.5% stake, while unsecured bondholders will get 10%, the report said.
Judge Gerber’s ruling followed four days of hearings on the deal and came amid hundreds of objections from dissident bondholders, and car-accident victims with product-liability claims, among others, who said the deal wasn’t fair.