GMAC stays mum on debt swap
By BREE FOWLER , 12.29.08, 02:39 PM EST
The financing arm of General Motors Corp. remained silent Monday on whether it had raised enough capital to become a bank-holding company and eligible for access to billions in federal bailout money.
Analysts have speculated that if GMAC
GMAC had received the Federal Reserve's approval to become a bank holding company last week, but the approval was contingent on the auto and home loan provider raising at least $30 billion in regulatory capital. The company had been attempting to raise the needed funds through a complicated debt-for-equity exchange that expired at 11:59 p.m. EST Friday.
In an e-mail Monday, GMAC spokeswoman Gina Proia said GMAC still had no news to announce regarding the debt swap. That came after Saturday e-mails that did not provide any specifics but said that GMAC planned to announce the results of the debt swap soon.
"The offer did expire yesterday at 11:59 p.m. as planned. We have not yet issued final results but intend to in the near term. I have no further comment on the exchange until then," Proia wrote Saturday.
Becoming a bank-holding company would both qualify GMAC to access the government's bank rescue funds and support GMAC loans to car buyers and GM dealerships. GM owns 49 percent of GMAC.
The Federal Reserve apparently needed to see that bondholders were willing to inject more capital into GMAC. The bondholders needed reassurance that the Fed would approve GMAC's application to qualify for federal aid.
If the financing company fails to become a bank holding company, it could mean severe consequences for automaker GM.
General Motors
The Fed's action Wednesday came as GMAC was struggling to get bondholders to convert 75 percent of their debt into equity of the company. It's been nearly two weeks since GMAC has released any information about the amount of participation so far.
As of Dec. 17, only about 16.9 billion, or 58 percent, of its GMAC notes had been tendered, along with about $3.5 billion, or 38 percent, of the notes issued by its Residential Capital LLC mortgage business.
GMAC's goal is to reach $30 billion in capital, the majority of which would come from the exchange of debt. Another part of the equity requirement included a demand from the Fed that $2 billion of the total come from new equity. So far, GMAC has received a commitment of $750 million from GM and private-equity firm Cerberus Capital Management, which owns the majority stake in GMAC.
It's unclear whether that funding would come from the $17.4 billion in bridge loans the U.S. Treasury granted GM and Chrysler LLC - which is owned by Cerberus_ earlier this month.
Some of the rescue money will be available this month and next - $9.4 billion for GM and $4 billion for Chrysler, which have said they could be facing bankruptcy soon without government help. GM is set to receive the remaining $4 billion in loans after more money is released from the financial rescue account.
It was unclear Monday exactly when the Treasury Department planned to release the first set of loans.
"We're making good progress finalizing the automaker loans and are committed to closing them on a timeline that will meet their individual near term funding needs," Treasury spokeswoman Brookly McLaughlin said in a statement.
GMAC has not said publicly how much it was requesting from the $700 billion bank bailout fund. CreditSights analyst Richard Hoffman estimated in a research note Friday that GMAC "could have applied for up to about $6.3 billion."
The Fed order says GM will reduce its stake to less than 10 percent of the voting and total equity interest of GMAC. GM's remaining equity interest in GMAC will be transferred to an independent government-accepted trustee who must dispose of the equity held in the trust within three years of the trust's creation.
Cerberus, which led an investment group that bought a 51 percent stake in GMAC from the automaker for $14 billion in 2006, will reduce its stake in GMAC to no more than 33 percent of total equity.
In afternoon trading, GM shares fell 27 cents, or 7.4 percent, to $3.39.
Associated Press Economics Writer Christopher S. Rugaber in Washington contributed to this report.
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