Judge Robert E. Gerber of the U.S. Bankruptcy Court for the Southern District of New York has granted GM’s motions for debtor in possession (DIP) financing from the U.S. Treasury and the Canadian and Ontario governments.
The final ruling, one of several issued late yesterday, follows a preliminary one on June 1st when GM declared bankruptcy, which authorized GM up to use up to $15 billion from the estate. Now GM can spend as much as $33.3 billion in DIP financing.
The money, of course, is coming from the U.S. Treasury and the Canadian Federal, as well as the Ontario provincial governments.The money will be used for, among other things, GM’s normal liquidity requirements, including employee wages, health care benefits, supplier payments, and other general operating expenses.
While not necessary indicative of how the rest of the case will proceed, the rulings are the latest indication that, like Chrysler, GM will move out of bankruptcy protection at lightning speed compared to the usual glacially-slow lawyer-fee-driven process.
GM needs to emerge as a new GM as quickly as possible to remove the insolvent stigma, and get back to the business of selling cars and trucks. Year-to-date through May, GM’s sales are off 44%, compared to an industry drop of 37%.
In order to do this more effectively than in the past, CEO Fritz Henderson has promised significant changes at the executive level. However, Henderson’s future is in question, as the new Chairman and the Treasury Department continue to search for outside candidates to remake the Board of Directors, which will select the CEO.
The Honorable Gerber also approved on a final basis GM’s authority to pay prepetition claims of essential suppliers and vendors; authority to pay prepetition obligations to foreign creditors; authority to use cash collateral; authority to continue using its existing cash management system and approval of stock trading restrictions.
The stock trading restrictions are important since it will stop speculation in GM stock and allow GM to use previous operating losses in the new company’s results, which will help strengthen its balance sheet.