GMAC Has $16.9 Bil. of $38 Bil. Swap Needed for TARP Eligibility
ith a key deadline looming just a day away, GMAC LLC is running out of time and hasn't found nearly enough support for its plan to swap $38 billion of debt, become a bank holding company and gain eligibility for part of the government's $700 billion bank rescue package.
And barring a last minute change of heart by its bondholders, GMAC, which has posted billions of dollars in losses this year, could soon be forced to file for bankruptcy protection.
As of the end of Wednesday, the financing company had only tended about $16.9 billion, or 58 percent, of its GMAC notes along with about $3.5 billion, or 38 percent, of the notes issued by its Residential Capital LLC mortgage business.
GMAC, which provides financing for General Motors Corp. vehicle and dealer loans along with home mortgages, says it needs about 75 percent participation from bondholders on both offers in order to raise the $30 billion in regulatory capital required by the Federal Reserve to become a bank holding company.
"We're clearly disappointed with the follow through participation," said GMAC Spokeswoman Gina Proia. "But we're hopeful that we'll achieve the needed participation to meet the capital requirements before the end of Friday."
Late Tuesday, GMAC again extended the early delivery time for the offers until Friday. The expiration date remains Dec. 26.
Bondholders who tender their notes by Friday are eligible for incentive payments in the form of cash or the new notes, which means that most bondholders who ultimately tender their shares will most likely do so by Friday.
GMAC warned last week that failure to convert to a bank holding company would have a "material adverse effect" on its business. And analysts have speculated that without the federal financial help, the company could be forced to file for bankruptcy protection or shut down the ResCap division, which has accounted for the bulk of its recent losses.
The company urged its bondholders to participate in the offers during a conference call Thursday, saying that bank holding status was the company's only option for viability, according to Brian Johnson of Barclays Capital.
Johnson said in a note to investors that GMAC may have to again extend its deadline or sweeten the deal in order to get the bondholder participation it needs, but noted that GMAC officials said during the call that they would not make further concessions because there wasn't enough time left.
A failure at GMAC also could have an untold effect on its owners Cerberus Capital Management LP, which holds a 51 percent stake, and struggling Detroit automaker GM, which owns the rest.
If GMAC were to fail, Johnson estimated that Detroit-based GM could need an additional $9 billion to $13 billion in funding to supply financing to its dealers.
12/18/2008 4:33 PM
By BREE FOWLER
AP Auto Writer
NEW YORK
ith a key deadline looming just a day away, GMAC LLC is running out of time and hasn't found nearly enough support for its plan to swap $38 billion of debt, become a bank holding company and gain eligibility for part of the government's $700 billion bank rescue package.
