General Motors seeks approval to sell itself

UPHILL BATTLE FOR CHALLENGERS

While dozens of objections have been filed in the bankruptcy case, some have already been resolved or withdrawn, and challengers to the deal could face an uphill battle since the same court has already approved the Chrysler sale.

"I think Judge Gonzalez kind of made life easier for Judge Gerber here," Lubben said, citing the New York bankruptcy judge who approved Chrysler's sale and the several higher courts that backed his decision.

"People basically know the Second Circuit has already largely blessed this structure," he added.

GM has said more than 50 percent of its bondholders support the deal and also argued that the sale would maximize recovery for its stakeholders. Under the plan, the U.S. government would take a 60 percent stake in the newly formed company, the United Auto Workers union would have a 17.5 percent stake, the Canadian government would own about 12 percent, and GM bondholders are expected to get about 10 percent.

A group of small bondholders, which calls itself the "Unofficial Committee of Family & Dissident GM Bondholders," have said they do expect to mount a challenge to the sale. They filed court papers last week saying they may seek to call GM CEO Fritz Henderson and Harry Wilson of the U.S. Auto Task Force to take the stand as witnesses as they mount their case.

While Judge Gerber has said the group is free to make its case in court, last week he rejected its request to become an "official committee," blocking the group's attempt to gain more funding to mount a legal battle.

Several other individual bondholders -- some representing themselves -- have filed objections to the sale, along with the State of Texas which is claiming that the sale illegally challenges state laws on dealerships, and a group representing about 300 Americans with lawsuits against GM for alleged product defects.

GM, however, resolved a key objection from nine state attorneys general over the weekend, saying in court papers that the "New GM" would accept liability for future product defects. The company also said it would address objections raised by over 20 of its parts suppliers.

The case is In re: General Motors, U.S. Bankruptcy Court, Southern District of New York, No. 09-50026.