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GM Plans to Resolve Bankruptcy

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On: Thu, Sep 2, 2010 at 2:38PM | By: Sherry Christiansen


GM Plans to Resolve Bankruptcy

In automotive news today, Motors Liquidation Co., the former General Motors, has announced that it plans to come out of bankruptcy. The plan was submitted and but not yet confirmed in U.S. court. Over a year ago, General Motors was in bankruptcy court struggling to exist. Now, the automaker is laying the groundwork to sell stock to the public once again with the eventual goal of ridding itself of government ownership as it creates an exit strategy to come out of bankruptcy. It’s been quite a haul for the Detroit Big 3 automaker.

General Motors Co. filed the initial paperwork required to hold an IPO last month. The 700-page document submitted to SEC regulators laid risks for potential investors considering buying GM stock. GM didn't disclose exactly how many shares would be offered or the precise date, although experts say the IPO could come as early as October. The company also failed to mention how many shares the government (GM’s majority owner) plans to get rid of.

Such a sale would eventually lead to the government reducing its stake in the automaker. Ed Whitacre, the company’s former CEO, said government ownership has damaged GM's public image and adversely affected sales. However, GM warned in its filing that the U.S. Treasury would continue to own a "substantial interest" in the automaker following the IPO. In the plan to release itself from bankruptcy, the company will transfer all of its assets and liabilities into 4 different trusts and distribute its stock and warrants to unsecured creditors through its upcoming IPO.  

According to Automotive News.com: “Motors Liquidation is the shell of General Motors that retained all of GM's old unwanted assets and liabilities after the "new GM"—renamed General Motors Co—emerged from bankruptcy protection last year by completing a sale of its best assets, such as Chevrolet and Cadillac, to a new company funded by the U.S. Treasury.”

Motors Liquidation Co. is a 10% owner in GM stock and it “warrants exercisable for a further 15 percent of General Motors common stock on a fully diluted basis,” according to Reuters.

The 1st quarter of 2011 is the target date for Motors Liquidation Co. to receive confirmation of the plan by the court system; by then the company anticipates that much of the unsecured claims will be resolved. 

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