GM Creditors to Mediate Dispute With Elliott, Fortress

Creditors of General Motors Co. (GM)’s old assets in bankruptcy will start settlement talks with funds including Elliott International LP, Fortress Investment Group LLC (FIG), Morgan Stanley (MS) & Co. International and units of Paulson & Co. over $3 billion in disputed claims.

The court-ordered mediation will be overseen by Judge James Peck, according to court papers filed today in U.S. Bankruptcy Court in Manhattan. The dispute stems from a settlement made by the hedge funds regarding their investment in a Canadian unit of GM on the day of the automaker’s 2009 bankruptcy.

The mediation has been agreed to “for the purpose of facilitating a settlement,” creditors said in court papers.

A trust sued the hedge funds on behalf of creditors as part of the bankruptcy, questioning their right to a $367 million cash fee and a claim of $2.67 billion. GM Chief Financial Officer Daniel Ammann testified in court hearings that a negative outcome in the dispute could cost the automaker, now out of bankruptcy, as much as $918 million, or 50 cents a share.

The main bankruptcy case is In re Motors Liquidation Co., 09-bk-50026, U.S. Bankruptcy Court, Southern District of New York (Manhattan). The adversary case is Motors Liquidation Company GUC Trust v. Appaloosa Investment Limited Partnership I, 12-bk-09802, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Tiffany Kary in New York at tkary@bloomberg.net

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net

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