Lawsuits Could Put General Motors Back in Trouble
The next few weeks will be crucial for the auto company.
General Motors (GM) may see adverse effects on its progress pending a lawsuit pitting general creditors against hedge funds
It has been an eventful week so far for GM
Spyker claims that GM purposely sent Saab into bankruptcy by blocking a deal with a Chinese car manufacturer. According to Spyker, GM interfered with a deal between Saab, Spyker and Chinese investor Zhejiang Youngman Lotus Automobile. Through this deal, Saab would have been able to restructure and remain solvent. The $3 billion claim against GM is the amount that the deal with Youngman would have been worth.
A trust for creditors of the old, bankrupt part of the auto-maker now known as Motors Liquidation Co. sued the hedge funds in a Manhattan bankruptcy court in March, alleging that while GM was preparing its bankruptcy filing on June 1, 2009, four hedge funds, which held notes in a Canadian unit of GM, “saw an eleventh-hour opportunity for profit and pounced.”
This latest lawsuit will only serve to undo the new GM further. According to Bloomberg, "The trust seeks to have a $2.67 billion claim and a $367 million payment negotiated for holders of notes in GM's Nova Scotia unit disallowed or reduced, saying the hedge funds seek more than three times what General Motors actually owed them."
The trust is known as the Motors Liquidation Co.'s GUC Trust and it represents the rights of creditors to recover stocks and warrants in the case. It recently traded at $13.94.
“New GM intends to participate in the trial of the claims objection to the extent required to protect and preserve the sale order,” lawyers for the company wrote.
The crux of the case seems to be that since GM didn't complete its agreement with the hedge funds until after it filed for bankruptcy, it required approval from bankruptcy court and never got it.
The next couple of weeks could prove integral to General Motors' future.
On Wednesday, General Motors traded flat at about $20.40.
Editor's Note: This content was originally published on Benzinga.com by Brett Callwood.
Below, find some more great ETF and market content from Benzinga:
S&P Places Greece on Negative Watch, Lowers Forecasts
McDonald's Shares Decline on Flat Monthly Comparable Sales
General Dynamics, Potash Corp. and Other Stocks Worth a Look
Benzinga Pro covers this and all market news in real time. Get your free trial here.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.