A small group of General Motors Corp
The group, which calls itself the Unofficial Committee of Family & Dissident GM Bondholders, said in court papers that it wanted the court to reject GM's proposed fast-track sale and rather pursue an accelerated bankruptcy reorganization plan that could still allow GM to emerge from bankruptcy within 60 to 90 days.
GM is proposing to do a speedy 363 sale of its best assets, named after section 363 of the U.S. bankruptcy code, rather than come up with a typical Chapter 11 reorganization plan.
The bondholders fear that under the government-orchestrated proposed sale of GM's assets, they would not be able to participate in a speedy reorganization process.
The group said it represents the interests of more than 1,500 mainly family and noninstitutional bondholders holding more than $400 million in GM bonds, who had been unfairly excluded from the process.
GM, which filed for bankruptcy protection on June 1, is seeking court approval for a government-backed restructuring plan under which the Obama administration would take a 60 percent stake in the newly formed company made up of GM's most profitable assets.
The UAW would have a 17.5 percent stake in the new company, and the Canadian government would own about 12 percent while GM bondholders are expected to get about 10 percent.
This 'private' deal was struck in a back room, without any transparency, without any meaningful opportunity for the bondholders represented by the (unofficial committee) to participate in the process, the group said in its objection filed in U.S. bankruptcy court in Manhattan.
The unofficial committee said that if the sale was approved, bondholders and unsecured creditors would face disproportionate losses on $27 billion in claims they have against the automaker.
The bondholders claimed that GM was pursuing an impermissible covert reorganization known as a sub rosa plan, in an argument similar to that made by dissident lenders opposing Chrysler LLC's bankruptcy sale last month.
New GM could have been created fairly, in accordance with the law, transparently, and urgently, with a plan of reorganization, the group wrote. It can still be done in that proper manner.
The unofficial committee is being by represented by attorney Michael Richman of the Washington, D.C.-based Patton Boggs law firm, according to court documents. It will seek to become an official committee at a bankruptcy court hearing next week.
GM is also facing a handful of challenges to its sale, including some limited objections from suppliers or other parties it had business relationships with and one from the state of Texas which claims GM's plans to reject certain dealerships or force other dealers to sign on to new agreements under the threat of rejection violate Texas law.
Some individual bondholders, including a 79-year-old bondholder from New York, and a Connecticut accounting professor and his wife who hold GM debt, have also filed papers opposing the sale with the court.
A court hearing on GM's sale request is scheduled for June 30.
The case is In re: General Motors Corp, U.S. Bankruptcy Court, Southern District of New York.
(Reporting by Emily Chasan, editing by Matthew Lewis)