July 7 (Bloomberg) -- General Motors Corp.’s sale of most of its assets to a U.S. Treasury-funded buyer won’t be stalled by the only appeal of a decision approving the transaction, a lawyer for objecting creditors said.

Steven Jakubowski, a lawyer for creditors appealing a July 5 ruling, said he won’t seek a stay blocking the sale while the appeal is being considered. His clients are people with accident-related claims involving GM vehicles. Jakubowski said the new company should take responsibility for claims that predate the sale.

U.S. Bankruptcy Judge Robert Gerber, who approved the sale, said it was the only option available to the bankrupt Detroit- based automaker, which filed for court protection June 1. The appeal should go directly to a federal appeals court, Jakubowski said.

“This is a matter of public importance,” Jakubowski, an attorney with the Coleman Law Firm in Chicago, said in a phone interview on why he appealed yesterday.

Gerber stayed his order through noon New York time July 9 to give opponents a chance to appeal. GM asked that the order to be made effective immediately.

The Unofficial Committee of Family & Dissident GM Bondholders said in an e-mailed statement from their lawyer Michael Richman that it doesn’t plan to appeal the sale due to the potential cost.

Lack of Resources

“The committee members today simply lack the resources needed to mount an effective appeals process on the accelerated basis that would be required here,” chairman Hal John said. The group of three investors said they were representing as many as 2,000 others who own as much as $500 million of GM debt. Richman of Patton Boggs LLP had argued Gerber should call the Obama administration’s bluff that it would let GM liquidate if the sale weren’t approved. He wanted Gerber to force the automaker to file a complete reorganization plan on which creditors could vote.

GM’s lawyer Stephen Karotkin, of Weil, Gotshal & Manges LLP, said that barring a further stay the sale will “close promptly,” a comment repeated by GM Chief Executive Officer Fritz Henderson on a company blog.

The company will have a “leaner and meaner” management after the sale closes, said Steven Rattner, the Treasury’s chief auto adviser. The new GM will be a smaller company than it was and somewhat less global so it will be natural for the management structure to change, Rattner said yesterday during a conference call.

Executive Firings

GM has said it will fire about 35 percent of its top 1,300 executives, leaving it with 845.

Gerber’s decision largely followed the ruling of another Manhattan bankruptcy judge, Arthur Gonzalez, who approved the sale last month of most of the assets of GM’s smaller rival, Chrysler LLC, to an entity to be run by Fiat SpA. That decision was affirmed by the Second Circuit, though the court has yet to issue a full opinion.

“This is going to be a hard appeal to win, at least in the initial rounds,” Seton Hall University professor Stephen Lubben said, noting Jakubowski would need to get the case before the Second Circuit very quickly without a stay beyond July 9.

Gerber decided the GM sale, like Chrysler’s, could be done “free and clear of claims,” meaning the reorganized company needn’t take on product-liability and asbestos claims from before the transaction is completed.

Liability Costs

GM estimated the cost of future product liability claims at $921 million and asbestos-related tort claims at $648 million as of the end of 2008, according to a regulatory filing.

Barry Bressler, a lawyer representing more than 300 tort claimants with what he estimated as $1.25 billion in claims against GM, said Gerber’s ruling “was not unexpected.” He declined to say whether he would appeal.

Bressler, who also represented tort claimants in the Chrysler case, has asked the U.S. Supreme Court to review the liability issues. The court, which declined to halt the Chrysler sale, hasn’t decided whether to hear that petition.

Jakubowski said it was possible the Supreme Court might consolidate his appeal with Bressler’s and decide both simultaneously.

It may be difficult to get the Supreme Court to take up the Chrysler petition now after the sale has closed, because it could be considered moot, Lubben said.

Bankruptcy Sales

The issue needs to be addressed because so many companies are selling their assets through quick “363 sales” in bankruptcy, cutting off existing liability, Jakubowski said. He argued along with Richman at a three-day hearing before Gerber that GM should file a traditional Chapter 11 reorganization plan and seek creditors’ votes, a process that might take months.

GM and the Treasury argued the company wouldn’t survive a traditional Chapter 11 case. The government said before the ruling that it would pull its $33 billion in financing if Gerber didn’t approve the sale by July 10.

Gerber agreed in his ruling.

“As nobody can seriously dispute, the only alternative to an immediate sale is liquidation -- a disastrous result for GM’s creditors, its employees, the suppliers who depend on GM for their own existence, and the communities in which GM operates,” Gerber said in an 87-page opinion.

Should the sale close in its current form, the U.S. government would get 60 percent of the new GM for making $50 billion in bailout loans, a United Auto Worker retiree trust would get a 17.5 percent stake, and two Canadian government entities would get an 11.7 percent equity share for their loans.

Old GM’s Equity

Old GM would get 10 percent of the equity, plus warrants, to distribute to bondholders and unsecured creditors.

“This was a bailout of the UAW, not of GM,” said Peter Kaufman, president of the Gordian Group LLC and an adviser to the Family and Dissident Bondholders. “It’s a tragedy. Twenty- seven billion dollars of bonds, many if not the majority of which are owned by mom and pop, have been essentially wiped out.”

The estimated recovery on unsecured claims range from 10 cents to 20 cents on the dollar, Bressler said. His “economically fragile class” of clients may have to wait years for that recovery and would be under pressure to liquidate any stock and warrants they receive to cover medical bills, he said.

The case is In re General Motors Corp., 09-50026, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Christopher Scinta in New York at csinta@bloomberg.net.

Last Updated: July 7, 2009 00:01 EDT