In two recent monumental bankruptcy cases, In re Chrysler LLC et al., 1 (Chrysler) and In re General Motors Corp. et al.,2 (GM), the U.S. Bankruptcy Court for the Southern District of New York approved the sales of the bulk of each of the debtor’s assets, outside of the ordinary course of business, pursuant to §363 of the Bankruptcy Code (11 U.S.C. §363). The sales were approved shortly after the filing of the respective debtors’ petitions commencing their voluntary Chapter 11 cases. In each case, the U.S. government played a significant role in effectuating the sales, through substantial prepetition financing and becoming a significant owner of each of the acquired entities.
Bankruptcy Judge Robert Gerber in making findings regarding the U.S. government’s assistance to GM said “the failure of any of the Big Three (or worse, more than one of them) might well bring grievous ruin on the thousands of suppliers to the Big Three…; other businesses in the communities where [they] operate; dealers…; and states and municipalities…. The U.S. government’s fear—a fear this Court shares, if GM cannot be saved as a going concern—was of a systemic failure throughout the domestic automotive industry and the significant harm to the overall U.S. economy….” GM 407 B.R. 463, 477.
