Join        Login             Stock Quote

Could General Motors (GM) Be Headed For Bankruptcy This Week?

 December 10, 2012 01:59 PM

(By Rich Bieglmeier) A little noticed story in the Washington Free Beacon on December 6, 2012 warned, "A New York federal judge may rule imminently on a case that could reverse the General Motors (GM) bailout and send the company back into bankruptcy, according to sources close to the case."

It all dates back to the bailout in 2009. A payment of $367 million was made to hedge funds to stop the funds from forcing GM Canada into bankruptcy over 1.3 billion in liabilities. Canada's bankruptcy process could have derailed Uncle Sam's bailout in the states. This deal was never reviewed by Judge Robert Gerber who okayed the expedited bankruptcy, putting all the bad stuff in "Old GM" and all the good stuff in "New GM."

[Related -Tesla Motors Inc (TSLA): How Tesla Fares Against Upcoming Electric Cars]

According to the Free Beacon article, judge Gerber isn't all too happy about the last minute deal not crossing his desk before his decision. In July the judge said, "When I heard about that, it wasn't just a surprise, it was a shock." He added, "When I approved the sale agreement and entered the sale approval order I mistakenly thought that I was merely saving GM, the supply chain, and about a million jobs. It never once occurred to me, and nobody bothered to disclose, that amongst all of the assigned contracts was this lock-up agreement, if indeed it was assigned at all."

In addition to Gerber's unhappiness, unsecured creditors believe the $1.3 billion belongs to them, and that's what the judge will be deciding on shortly. An analyst told the Beacon, "The judge has made it very clear that he is greatly dissatisfied with the process, he's basically implying that GM hid it from him and that reopening the sale is a possibility."

[Related -General Motors Company (GM): How Q3 Earnings Will Fare?]

Of course, GM says it isn't so; however, Chief Financial Officer Daniel Ammann is on the record saying, "A lawsuit over some Canadian notes may harm the company by as much as $918 million, or 50 cents a share."

Based on Judge Gerber's comments about saving "about a million jobs," iStock believes he will not reopen the case. Rather, we feel the judge will make his unhappiness known by smacking the company with the $1.3 billion hit, maybe more. With 1.57 billion shares outstanding, the total could add up to twice Ammann's projection of 50 cents per share.

Since it is a onetime event, the loss would hurt, but wouldn't be as devastating as reopening the 2009 bankruptcy process. However, with dealership inventory piling up, General Motors (GM) could be in for a rough couple of quarters, despite robust car sales.



Post Comment -- Login is required to post message
Alert for new comments:
Your email:
Your Website:

rss feed

Latest Stories

article imageAutomating Ourselves To Unemployment

In this current era of central planning, malincentives abound. We raced to frack as fast we could for the read on...

article imageFed: Waiting For June… Or Godot?

The Federal Reserve left interest rates unchanged yesterday, as widely expected. But the possibility of a read on...

article imageThe Single Best Place To Invest Your Money For Retirement

It was never supposed to be this daunting. At least that's what we were read on...

article imageNegative Blowback From Negative Interest Rates

The Federal Reserve is widely expected to leave interest rates unchanged today. But perhaps standing pat read on...

Popular Articles

Daily Sector Scan
Partner Center

Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.