GM Creditors Sue JPMorgan, Claim $1.4 Billion Loan Unsecured

GM Creditors Sue JPMorgan, Claim $1.4 Billion Loan Unsecured


Aug. 1 (Bloomberg) -- The committee representing General Motors Corp.’s unsecured creditors sued JPMorgan Chase & Co. and dozens of other lenders, claiming a $1.4 billion loan they made to the automaker before it filed for bankruptcy was unsecured.

Lenders on the syndicated loan, which predated GM’s Chapter 11 filing on June 1, didn’t have a perfected lien on GM’s assets and so shouldn’t have had their claims paid ahead of other creditors, according to the complaint filed yesterday in U.S. Bankruptcy Court in New York.

The loan was paid off with funds from $33 billion in financing that GM received from the U.S. and Canadian governments during its reorganization. The creditors claim the security interest agreement on the loan was terminated in October 2008. JPMorgan said the suit seeks to take advantage of an action taken in error by one of GM’s law firms.

“The collateral for the loan was in place when GM filed” for bankruptcy, JPMorgan spokeswoman Kristin Lemkau said. “The lawsuit is without merit and we are confident that it will be dismissed.”

Old GM sold most of the automaker’s assets to a group led by the U.S. Treasury earlier last month and is liquidating the remainder in bankruptcy court. Detroit-based New GM, known as General Motors Co., continues to be funded by the U.S. and Canadian governments.

The case is In re Motor Liquidation Co. f/k/a General Motors Corp., 09-50026, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

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