Kentucky environmental attorney Sanders says General Motors files for bankruptcy in New York with almost $173 billion in debt.

An affiliate of General Motors filed for bankruptcy on Monday morning paving the way for GM to submit its Chapter 11 Bankruptcy petition to a federal clerk in Lower Manhattan.  Chevrolet-Saturn of Harlem Inc., sought bankruptcy protection today, the first of many filings in the bankruptcy process.

While GM hasn’t yet filed, the affiliate called the parent company a “debtor in possession under Chapter 11,” in court documents, a reference to the main U.S. bankruptcy law.  

On May 31, 2009, the Company announced that the U.S. Department of the Treasury had informed it that the support of more than 54% of the bondholders allows the Company to proceed with its previously announced 363 Sale Proposal under U.S. Bankruptcy Court protection.

GM’s bankruptcy filing is the fourth-largest in U.S. history and the largest for an industrial company. The company has $172.81 billion in debt and $82.29 billion in assets.

GM’s common stock dropped 33 percent and closed at 75 cents per share on May 29, 2009.  That price per share is the lowest level in 76 years, and less than the $1 minimum price normally needed for a New York Stock Exchange listing. The stock was valued above $40 less than two years ago.

GM’s stock may, however, soon be worthless.  As currently discussed, GM’s plan is for the federal government to take a 60 percent ownership stake in the new GM. The Canadian government would take 12.5 percent, with the United Auto Workers getting a 17.5 percent share and unsecured bondholders receiving 10 percent. Existing GM shareholders are expected to be wiped out. 

Under its plan, GM will sell substantially all of its global assets to the New GM. GM will use its cash-on-hand and a new debtor-in-possession financing of approximately $33 billion to ensure an uninterrupted supply of goods and services and provide for other cash requirements prior to closing of the asset sale; fund liabilities to secured lenders and provide contingency funding to handle any potential unexpected needs.

None of GM’s operations outside of the U.S. are included in the U.S. Court filings or Court-supervised process, and these filings have no direct legal impact on GM’s plans and operations outside the U.S.

How the might have fallen! Let’s all say a prayer tonight for the GM employees, parts suppliers, and dealerships who will suffer a great deal of financial and emotional harm from this bankruptcy. God help America!