GM's Bankruptcy Bonanza

Edward Niedermeyer
by Edward Niedermeyer

Bloomberg reports that a GM bankruptcy filing could result in an up to $1.2b payout to its advisors, lawyers, accountants and affiliated toadies. According to UCLA Bankruptcy professor, Lynn LoPucki, the GM bailout bonanza could easily shatter the previous record for bankruptcy fees, set at $906 million by Lehman Brothers. “The bonanza has already begun and will continue through the bankruptcy,” LoPucki tells Bloomberg. Her estimate is based on bankruptcy statistics that she collects, and she says the size and complexity of GM would make its bankruptcy significantly more expensive than even the Lehman filing. And of course news of these fees has anti-bankruptcy politicians downplaying rumors that the Obama administration will arrange a Chapter 11 reorganization for GM.

“According to the guys I met with today (in the Obama administration), they’re not the ones who are pointing to bankruptcy,” says Michigan rep Carl Levin. “They’re not pressing it. That’s not their goal.” On the other hand, if the government can arrange Debtor-In-Posession (DIP) financing, shovel bridge loans into GM, mandate viability plans, limit executive compensation and demand concessions from the union and bondholders, why couldn’t they cap bankruptcy advisor fees? If not, even LoPucki admits that the fees may just be part of the cost of taking the necessary steps so late in the game. “GM is in serious financial difficulty,” she says, “and can’t make the cuts they need outside of bankruptcy [emphasis ours] because they can’t force creditors to go along with them.”


Edward Niedermeyer
Edward Niedermeyer

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  • Robert Schwartz Robert Schwartz on Feb 25, 2009

    Lynn LoPucki is a friend of mine and he is not a she. @Pat Holliday: "Can anyone afford to go bust these days?" C11 is not for the faint of heart nor light of wallet. It is a strategic business move undertaken to tackle big problems that are not amenable to ordinary business negotiations. GM would have had a much better shot if they had done it back before they ran out of money. As my late father z"l always said: "They always wait until they have run out of money, it is too late then." A C11 for one of the Beg 3, will be like a military operation. There are hundreds of parties, and they will hire thousands of lawyers, because it will be a big deal to them with millions, end even billions of dollars at stake. Even if the lawyers charged deeply discounted rates, the numbers of lawyers, and the magnitude of the job guarantee enormous legal fees.

  • PeteMoran PeteMoran on Feb 25, 2009

    Why do people talk in Absolute rather than Relative amounts? What's the cost of the work having to be put in NOW to do the pseudo-Ch11 'restructure', or a give me a measure of the cost difference one over the other.

  • BklynPete BklynPete on Feb 26, 2009

    “Robert Vaughn looks like he was pissed to have to do a car commercial. What a mannequin.” Actually I think James Bond Jr. was pissed that he got stuck with a lowly Corvair instead of the Corvette. Vaughn's always been stuck up. That's why it's so amusing to see him doing infomercials for pseudo-drugs and ads for ambulance chasers. On a brighter note, Elizabeth Montgomery really was a beauty.

  • Johnster Johnster on Feb 27, 2009

    Gee, this makes me feel old and sad. Lorne Greene (1915-1987) Dan Blocker (1928-1972) Michael Landon (1936-1991) Elizabeth Montgomery (1933-1995) Agnes Moorehead (1906-1974) Dick York (1928-1992) Pernell Roberts and Robert Vaughn are still alive. After Liz Montgomery died her family had an estate sale (about 1996 or so) and sold many of her personal effects. Among the items sold were her cars, an early 1970s Oldsmobile Cutlass Supreme convertible that she supposedly drove everyday and a Bentley Sedan (I think it was a Bentley T) that was used for more formal occasions and that had a personal license plate reading "Bent-Liz".

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