GM, which named a new chairman Tuesday, is slated to gain new owners in its bankruptcy, filed under section 363 of the bankruptcy code. A 363 filing enables t a company to get expeditious treatment and to largely bypass creditors, who do not have the same rights to force consensus as they do in a Chapter 11 bankruptcy. A Chapter 11 reorganization "requires the approval of the creditor body," says New York bankruptcy attorney John Jerome. "You wrap everything into a plan and have the creditors vote on it. That way, you won't have people who are bound by the plan making trouble later on," which is happening in the Chrysler bankruptcy.
In a series of airline bankruptcies during the past three decades, Coyne says, 363s were never attempted because carriers anticipated that judges would not approve filings so favorable to the debtor at the expense of the creditors, and because the net operating loss would be lost to the new company. The rules are different in the GM and Chrysler bankruptcies because the government is the major financier and a major shareholder. The owners of the new GM would be the U.S. government, with 60%; the governments of Canada and Ontario with 12%, a retiree health care trust fund administered by the UAW, with 12.5%, and bondholders with 10%. The bondholder's share, filings indicate, will initially be issued to the company. "What's going to happen in the GM bankruptcy is whatever its major shareholder says is going to happen," says Elmer Dean Martin, an attorney in Diamond Bar, Calif., in Los Angeles County, whose practice includes cases involving tax loss carry forwards.