Legal News

GM Falls; Weil to Stay Busy

By Ashby Jones

Less than an hour ago, as had been widely anticipated, General Motors filed for Chapter 11 bankruptcy protection in New York. The case was assigned to Judge Robert Gerber; signing the filing on behalf of GM was not Weil Gotshal’s Harvey Miller but the firm’s Stephen Karotkin. Click here for the WSJ story; here for the NYT’s story; here for the Detroit Free Press story; here for the bankruptcy petition itself.

Meanwhile, the General Motors Acceptance Corp. has not filed for bankruptcy protection.

According to the Journal story, bankruptcy should allow GM to pull off one of the most expedient downsizings in the industry’s 120-year history. Almost overnight, GM plans to eliminate almost all of its debt, halve its U.S. brands, shutter 2,600 dealers and rewrite labor contracts. Emerging sometime this summer would be a GM with a cleaner balance sheet and slimmer operations than the company that has posted deep losses since 2005.

The bankruptcy is slated to run its course in a matter of months. One potential sign of turbulence, however, secured lenders to GM, which are owed about $6 billion, expect the government to pay their claims at face value during court proceedings, but only if they release their claims against certain GM property, such as inventory, machinery and receivables. This could open the lenders to later demands they pay back part of the loans, if the collateral is deemed less valuable than initially agreed upon.

Shearman & Sterling is repping various creditors and suppliers. We’ll give you the names of other firms on the case as we get them.

In other bankruptcy news, Chrysler LLC could exit bankruptcy reorganization as soon as Monday, after barely a month in Chapter 11 protection. Judge Arthur Gonzalez of the U.S. Bankruptcy Court in Manhattan rejected arguments from some Chrysler creditors and dealers seeking to block the deal, noting in his 47-page judgment that Fiat SpA was the only viable alternative to the immediate liquidation of the company. Click here for the WSJ story. Jones Day’s Corinne Ball is the lead debtor counsel to Chrysler.

Full post as published by Law Blog - WSJ.com on June 01, 2009 (boomark / email).