A trust of unsecured creditors has sued General Motors, claiming that certain hedge funds were favored improperly in a lock-up agreement. And if Bankruptcy Judge Robert Gerber motions the case to go forward, the automaker could see a loss of $918 million.
The case was filed in the U.S. Bankruptcy Court in New York, and is officially titled “Motors Liquidation Company GUC Trust v The Liverpool Limited Partnership et al.” On paper, General Motors Company is not a defendant, but should the judge rule in favor of the hedge funds, the new-found General Motors, LLC. will be held liable to front nearly $1 billion owed by GM Canada to a finance firm based in Nova Scotia that issued notes to the hedge funds.
According to court documents, the lock-up agreement was negotiated with both the involvement of the governments of Canada and the United States, which were, of course, funding GM’s bankruptcy. The creditors’ trust claim that the lock-up agreement was unfair to “Old GM” creditors, and that the deal took place after the bankruptcy filing.