CORPORATE TRANSACTIONS & COMPLIANCE BLOG

Appeals Court Rules in Favor of Unsecured Creditors in GM Bankruptcy Case

By: Clare Oliva, COGENCY GLOBAL INC. on Thu, Jan 22, 2015
PiggyBank_Fotolia_72995084_XS.jpgOn January 21, 2015, the U.S. Court of Appeals for the Second Circuit ruled that the $1.5 billion loan made to General Motors Co. prior to its 2009 Chapter 11 bankruptcy filing was unsecured debt as a result of a UCC3 termination statement that was filed in error. The court held that “although the termination statement mistakenly identified for termination a security interest that the lender did not intend to terminate, the secured lender authorized the filing of the document, and the termination statement was effective to terminate the security interest.”

In the initial stages of the Chapter 11 proceeding, the loan was repaid. This ruling will enable unpaid creditors from the 2009 bankruptcy to ask JPMorgan Chase Bank N.A. and its group of lenders to return the money so that it can be claimed by all of the unsecured creditors of the old General Motors.

To view the details of this ruling, click here.

For more background on this case, see our previous blog article, Delaware Supreme Court Finds Mistaken UCC Termination Statement Effective.

Topics: Article 9 Filing, Searching and Due Diligence, UCC