In another blow to maintaining administrative solvency (much less any hope of recovery by the unsecured creditors on prepetition claims),  on March 23, 2009, Cadence Innovation settled its $4,914,075 claim against GM for $2,830,000 ($2,000,000 cash and $830,000 GM loan reduction).  For Cadence Innovation this result certainly represents a disappointment.  The $4,914,075 certainly would have been viewed as “in the bank.”

The settlement had to be blessed by Bank of America, who continues to outstanding post petition financing long after it was intended to be satisfied.

The settlement also received the approval of the creditors committee. The reasons for the creditors committee approval are not known. It may have been because there was a latent problem with Cadence’s case or because there the committee concluded that no funds were going to be available to the unsecured creditors even if the settlement was more favorable (i.e. no dog in the hunt).

The Consent Order shows that GM has had enough of dealing with Cadence. The payment is in full satisfaction of all obligations of GM to Cadence. All agreements between Cadence and GM are “deemed rejected” as of the date of the Consent Order.

The next question is whether the case will convert to a Chapter 7 liquidation. If so, a trustee will be appointed. Will that decision make any difference to the unsecured creditors? Probably not.