Why Did General Motors Have to Pay This $50 Million Settlement?
General Motors (NYSE:GM) reached a $50 million settlement with a trust created to pursue payment for creditors shortchanged by a deal GM cut with hedge funds before announcing its bankruptcy in 2009, Reuters reports.
The complex litigation is over an agreement in which the hedge funds agreed to accept a payment of $367 million rather than pursue claims of up to $1 billion that was owed to them by the Nova Scotia unit of GM. That move was meant to keep GM Canada out of insolvency, and the trust claimed the deal should have gone before U.S. Bankruptcy Court before moving ahead. GM said that going through litigation on the matter could cost the company $918 million in claims, and that it was glad to have been able to reach a settlement instead.
The $50 million settlement agreement was reached on Friday and still needs to be approved by a U.S. Bankruptcy Court in a hearing on October 21, Reuters says. GM and the hedge funds both denied any wrongdoing.