GMAC LLC, the auto and home-lender that won Federal Reserve approval to become a bank holding company, may be in line for as much as to $6.3 billion (€4.5 billion) in capital from the US rescue plan, CreditSights, said in a report issued yesterday.
The lender also may issue as much as $17.5 billion of guaranteed debt under the government-backed Temporary Liquidity Guarantee Program, CreditSights analyst Richard Hoffmann said.
GMAC, the primary lender to General Motors, is facing a midnight deadline for debt holders to exchange $38 billion in bonds as part of its plan to reduce debt. The lender said it needed three-quarters of investors to approve the swap, and as of December 17th holders of 58 per cent of eligible notes had tendered.
"We believe GMAC has been less than clear in detailing how it would achieve adequate capital levels," Mr Hoffman wrote. "But with the primary regulator on board, the capital raise machinations seem almost a moot point."
The debt exchange deadline remained 11.59pm New York time yesterday [December 26th], GMAC spokeswoman Gina Proia said. The company declined to specify how much it hoped to raise by selling preferred shares to the government as part of the rescue package, she said.
The Fed used emergency powers on December 24th to approve GMAC's request to become a bank holding company, citing turmoil in financial markets and the potential damage to GM, which has warned it is running out of cash. GM and Cerberus Capital Management LP, GMAC's majority owner, will give up control of the lender to comply with rules on who can own banks.
"This will give GMAC a second run," Kimberly Rodriguez, principal of Grant Thornton LLP's automotive practice, said yesterday.
"It should allow for some additional purchases by individual car buyers as well as dealers."
Through December 19th, more than 190 regional lenders, insurers and financial companies have sought Troubled Asset Relief Program funds, while 148 have received preliminary approval for $61.7 billion. Seven banks have received more than $6.3 billion, while two others, PNC Financial Services Group and US Bancorp, have preliminary approval for larger amounts.
GMAC's 5.625 per cent notes due in May 2009 jumped 20.3 cents to 93 cents on the dollar to yield 26 per cent.
- (Bloomberg)
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