Monday, June 1, 2009

general motors bankruptcy

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NEW YORK (Reuters) - general motors bankruptcy will forever be tied to one dealership in an often-ignored neighborhood due to the quirks of U.S. bankruptcy law.

Before GM filed its historic general motors bankruptcy on Monday, Chevrolet-Saturn of Harlem made its own Chapter 11 filing. The dealership's move gave the automaker legal access to its preferred bankruptcy court in Manhattan.

Normally a Detroit-based company such as general motors bankruptcy would file in Michigan or Delaware, where it is incorporated. The only way for it to file in New York would be through a subsidiary that did most of its business in New York or was incorporated in the state.

Court papers appear to describe a car dealer that sold significantly more corporate bonds than Camaros, running up $40 billion of debts and obligations to unions.

Rather than try to pinpoint the financial state of the dealership, general motors bankruptcy simply listed its own consolidated creditors and assets with the affiliate, which is typical in such a case, said Greg Werkheiser, a bankruptcy lawyer with Morris, Nichols, Arsht & Tunnell in Wilmington, Delaware.

Once the attorneys handling the general motors bankruptcy decided they wanted to file the case in Manhattan, known for its expertise and speed in handling huge bankruptcies such as Enron and WorldCom, they needed to find a way to bring it to Broadway.

The technique has been used before. Chicago-based General Growth Properties, the second-largest mall owner in the United States, recently used its South Street Seaport unit in New York to file for bankruptcy in Manhattan.

The problem for general motors bankruptcy : of the 174 affiliates listed in its annual report, none appear to satisfy the requirements for a New York filing. That's where the Harlem dealership came in.

Thegeneral motors bankruptcy on Second Avenue in East Harlem opened a few years ago with much fanfare as an investment in a minority-owned business in a struggling neighborhood.

However, the franchise did not work out as planned and general motors bankruptcy took it over, becoming a rare company-owned store that the automaker planned to run until another franchisee could be found.

As the government's deadline for general motors bankruptcy to restructure neared, the dealership became something far more valuable: a way to file for bankruptcy in Manhattan.

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