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GM Is Running Out of Gas, Will Likely Declare Bankruptcy

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By Kevin Fayle on May 27, 2009 1:37 PM

GM said before a crucial vote by bondholders on a tender offer of stock for debt that the company would declare bankruptcy if the bondholders rejected its offer.

The bondholders did, but so far GM hasn't filed any Chapter 11 papers.  Most analysts seem to think that it's only a matter of time, however.  One reason for the delay could be that the company is trying to get approval from the United Auto Workers for a new set of concessions.

In the meantime, GM has already begun bundling its European operations under its German company, Adam Opel, in order to facilitate a sale of the business.
One potential buyer for GM's European assets is Italian automaker, Fiat.  Fiat is also attempting to purchase substantially all of Chrysler's assets as well, a move that a bankruptcy judge is mulling over in New York today.

Monday, June 1 is the government's deadline for GM's restructuring.  Most observers predict that the company will file for bankruptcy no later than that, though many expect a filing before the week's end.

In a post on FindLaw's Strategist blog yesterday, I mentioned how a GM bankruptcy could tax BigLaw bankruptcy attorneys who already have their hands full with the Chrysler and Lehman Bros. bankruptcies (not to mention a slew of other complex corporate bankruptcy actions.)

This could mean that corporate legal departments may have to take on more of the work than usual during a big bankruptcy, or else divide the work and parcel it out to smaller, less expensive boutique firms.

If you need to refresh your memory on bankruptcy law, the InHouse Blog has a link to a bankruptcy primer for in house counsel written by Carmen H. Lonstein, Esq., of Baker & McKenzie LLP

Let's hope you don't need it.

See Also:
G.M. Nears Bankruptcy as Debt Exchange Fails (NYTimes.com)
GM: Government Motors About to Downshift into Bankruptcy (Huffington Post)

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