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GM may face US$918-million loss due to suit stemming from bankruptcy

Posted Jan 4th 2013 2:14PM

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General Motors may see a loss of US$918 million should a bankruptcy judge rule certain hedge funds were favoured over other investors during the automaker's 2009 restructuring. A trust representing a number of unsecured creditors has sued to undo a lock-up agreement that saw hedge funds receive around US$367 million while other creditors were left to recover a slim fraction of their original investments. The creditors claim the agreement was unfair and that it took place after after the bankruptcy filing. That means the deal would have been subject to scrutiny by bankruptcy courts.

But both GM and the hedge funds maintain the lock-up agreement was sealed before the bankruptcy took place, meaning it isn't subject to judge approval. Judge Robert Gerber held several days of trial between August and October and a ruling is expected early this month. Should Gerber rule in favor of the trust, GM will have to pay up on a loan of almost US$1 billion owed by GM Canada to a Nova Scotia lender.

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News Source: Reuters

Image Credit: General Motors

Category: GM, Government/Legal, Earnings/Financials

Tags: bankruptcy, bankruptcy court, court, general motors, gm, government, legal

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