GM inks deal to settle creditor trust suit for $50 million

Article by Anita Panait, on October 2, 2013

General Motors Co. has reached an agreement to pay $50 million to put a closure to the long-running lawsuit over a secretive agreement made on the eve of its 2009 bankruptcy that critics claimed favored hedge funds. The deal terminates complex litigation wherein hedge funds affiliated with John Paulson and Paul Singer's Elliott Management agreed to cut the amount they claim they were owed in the bankruptcy of "Old GM."

GM had warned that the litigation could cost it around $918 million. Now, GM only has to pay $50 million thanks to the settlement, which still requires approval from the U.S. Bankruptcy Court in Manhattan at a hearing set on Oct. 21. The litigation commenced when a trust -- created to uncover money for creditors who were shortchanged by GM’s collapse in 2009 – filed a suit against the carmaker and the hedge funds in 2012. The trust challenged an agreement reached as GM was filing for bankruptcy.

Under the deal, the hedge funds agreed to waive their claims of over $1 billion owed to them by GM’s Nova Scotia unit in exchange for $367 million. The agreement was intended to keep GM Canada out of insolvency.

The new GM returned to the stock market in 2010 with unwanted sites and equipment liquidated for the benefit of creditors. However, other creditors of Old GM thought of the agreement as a sweetheart deal. The trust argued that the agreement should have been presented to the U.S. Bankruptcy Court for approval and should be unwound. However, GM said that doing so might expose it to claims of up to $918 million.

Topics: gm

If you liked the article, share on:

Comments

Recommended

One of the executives at Volkswagen tagged in the so-called Dieselgate scandal has pleaded not guilty to a list of allegations surrounding the carmaker’s actions to cheat emissions regulations in...
by - February 27, 2017
When the Crown De Luxe saloon was first released in 1972, it was at that time the most lavish Toyota model available to British customers. Both unusual and exclusive, one...
by - February 27, 2017
The ride-sharing fleet of sharing Lyft Inc. will soon include thousands of specially fitted self-driving Chevrolet Bolt electric vehicles, courtesy of General Motors. If plans push through, Lyft’s clients would...
by - February 27, 2017
J.D. Power has officially released the 2017 Vehicle Dependability Study, an annual list of the most dependable brands in the auto industry. Once again coming on top is Lexus, the...
by - February 26, 2017
Citroen revealed that its entry to the Chinese market is moving forward with the planned release of the new generation C5. While still on sale on this part of the...
by - February 26, 2017
Facebook

Youtube Channel

Tip Us
Do you have a tip for us?
Did you film an important event?
Contact us
Newsletter
Subscribe to our newsletter!
Subscribe
Galleries