It appears that shoving aside first-in-line creditors in favor of auto worker unions during the great U.S. car manufacturer bankruptcy cramdown of 2009 wasn't the only shenanigans that were pulled by the Obama administration.
From the Washington Free Beacon:
A backroom deal hatched by General Motors during the auto bailout to fulfill the Obama administration’s demand for a quick bankruptcy could be reversed, draining the automaker of nearly all of its cash on hand and leaving it in worse shape than it was when it collapsed in 2009.
As GM teetered on the edge of bankruptcy in June 2009, it cut a $367 million “lock-up agreement” with several major creditors in order to prevent its Canadian subsidiary from going under. The move spared the subsidiary from fulfilling the $1 billion debt it owed the creditors—major hedge funds—ensuring that GM would not have to face bankruptcy courts in two nations, which could have delayed the company’s recovery.
The trustee for (old GM) creditors shortchanged by the government-driven bankruptcy are now suing the hedge funds in a move that could undo the bailout.
“Many U.S. creditors waived their rights to object because the government wanted to push through the bailout for political reasons,” risk analyst Chris Whalen said. “If they had continued through normal channels, they could have easily been in bankruptcy for five years. So they made sure these issues were not adequately briefed before the court.”
The GM that exited bankruptcy was radically different than the one that entered. The Treasury Department arranged for the company to split into Motors Liquidation Co., known as “old GM,” and created a “new GM” with the help of $30 billion from American taxpayers. Judge Robert Gerber, who approved the sale with little hesitation, could now reverse the entire auto bailout—and overturn one of President Barack Obama’s signature achievements.
“When I approved the sale agreement and entered the sale approval order I mistakenly thought that I was merely saving GM, the supply chain, and about a million jobs. It never once occurred to me, and nobody bothered to disclose, that amongst all of the assigned contracts was this lock-up agreement, if indeed it was assigned at all,” Gerber said in July.
Industry experts say GM should be very concerned with the judge's reaction to the deal.
The judge does not have line-item veto power which means the whole government-run bankruptcy deal could fall apart if this thing goes to court.
The U.S. and Canadian governments' desire to ram this thing through as quickly as possible without harming the pensions of the unions may very well come back to haunt them leaving General Motors in worse shape then they were in 2009.