Winston & Strawn restructuring and insolvency partner David Neier, who is based in the New York office, was quoted in a story titled "Careful with That Stick, D.C." that was published in the April 17, 2009 of The Deal. The article discusses the how the White House's automotive task force may lose its decision-making power of General Motors Corp. (GM) if it sends the automaker into bankruptcy. GM has been in insolvent since December 2008, relying on more than $13 billion in government loans to avoid filing for Chapter 11.
The automotive task force warned GM that loans will cease as of June 1 unless the automaker can secure cuts from its bondholders, unions, and dealers. Filing for Chapter 11 would give GM the power to rework franchise agreements, union contracts, and debt instruments that have burdened the automaker and have made it uncompetitive with foreign rivals.
According to the article, some creditors appear to favor a bankruptcy, despite the risk that their claims might be greatly reduced or even wiped out, because "there is a feeling that a judge would be a more impartial mediator than the government has been."
"Bondholders have no incentive to negotiate right now because they are not being offered anything in return," said Mr. Neier. "They're waiting to see if they get a better deal in bankruptcy."