A U.S. bankruptcy judge is weighing whether to reverse a deal that benefitted
hedge funds at the expense of Old General Motors' unsecured creditors after
the parties failed to reach a settlement out of court.
The situation could cost New GM up to $918 million or even unwind parts of the company's bankruptcy restructuring, though the automaker has said the creditors don't have a case.
A ruling in the automaker's favor would eliminate such an expense and put a nagging remnant from the 2009 bankruptcy to rest.
U.S. Bankruptcy Judge Robert Gerber is expected to rule soon whether creditors should get paid instead of several hedge funds involved in the deal.
Bloomberg News reported that Gerber finished hearing arguments in the case Wednesday.
Creditors have accused the hedge funds, including Elliott Management and Fortress Investment Group, of settling $1.3 billion in claims against Old GM's Nova Scotia Finance unit for $367 million shortly after GM filed for bankruptcy.
The hedge funds say the deal occurred shortly before the June 1, 2009, filing, meaning it did not have to be approved by the bankruptcy judge.
Motors Liquidation Co. GUC Trust, which is handling GM's bankruptcy estate, and the hedge funds "participated in a mediation" that "concluded without the parties reaching a settlement," the parties reported Monday in a bankruptcy filing.
It's now up to Gerber to determine whether the hedge funds flouted bankruptcy code by making a deal just before the company filed its historic government-backed bankruptcy.
An Elliott Management spokesman declined to comment. GM, which said last year that it believes the claims are "without merit," declined further comment Wednesday.
The case stems from a deal in which Old GM lent a subsidiary based in Nova Scotia enough cash to pay off the hedge funds.
Gerber can decide whether to divert cash to unsecured creditors, who got almost nothing after GM emerged from its Chapter 11 restructuring, or fine the hedge funds for cutting a deal that excluded other creditors.
Most Popular Stories
- I never set out to be a role model but it's great to be one ; IN THE HOTSEATBetter known by his stage name Wretch 32, Jermaine Sinclair is a 28-year-old rapper from London. In 2011 his debut album Black and White sold over a million copies and scored three top five singles. His latest single Blackout was released this week
- Schedule packed with talent at the Fox
- SET PHASERS TO DUMB Spock emotional and in love? Nonstop explosions? The highly illogical enterprise of J.J. Abrams' 'Star Trek'
- Promoter McLean 'provided more musical joy than Dylan and Prince combined'
- European Car Sales up First Time in 20 Months
- Emirati announces new film project at Cannes
- Entrepreneurs Chase Social Media
- The Blade, Toledo, Ohio, TK Barger column
- SINCE YOU ASKED [Pittsburgh Tribune-Review (PA)]
- Detroit Free Press Julie Hinds column