Still not clear if GMAC cleared hurdle for bailout

GRAND BLANC, Mich. – The financing arm of General Motors Corp. still wouldn't say on Saturday if it had met a midnight deadline to clear a final hurdle in its bid to become a bank holding company and gain access billions in federal bank bailout money.

GMAC Financial Services LLC had received the Federal Reserve's approval earlier in the week, but needed to complete a complicated debt-for-equity exchange by 11:59 p.m. EST Friday.

In an e-mail early Saturday, GMAC spokeswoman Gina Proia did not provide any specifics.

"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," she wrote.

Analysts have speculated that if GMAC didn't obtain financial help it would have to file for bankruptcy protection or shut down, which would be a serious blow to parent GM's own chances for survival.

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.

When the Fed on Wednesday made GMAC eligible to access part of the government's $700 billion bank rescue fund, it was contingent ailing auto and home loan provider completing the debt exchange.

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.

Shares of GM surged on Friday, the first day of trading since the Fed's announcement late Wednesday. Shares rose 41 cents, or nearly 13 percent, to $3.66.

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.

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 Cerberus Capital Management. It's unclear whether that funding would come from the bridge loans the U.S. Treasury granted GM and Chrysler LLC — which is owned by Cerberus_ earlier this month.

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.


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