GMAC stays mum on debt swap

GMAC is trying to become eligible to receive federal rescue funds.

NEW YORK (AP) — 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 Financial Services LLC doesn’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.

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 Friday.

In e-mails 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.

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.

KDP Investment Advisors analyst Thomas Ferguson said that the Fed’s approval was likely the encouragement bondholders needed, adding that he expects the debt swap to succeed and for GMAC to ultimately become a bank holding company.

“In that context, we note that, while we still regard GMAC’s operating uncertainties as enormous, we also think the implications of the bank holding company approval — particularly in the short-run — are both significant and positive,” Ferguson wrote in a note to investors.

Ferguson added that while it remains unclear exactly how much federal aid GMAC could receive, it looks as if the government is willing to help prop up the company, and GM, at least for the near future.

But if GMAC does fail to become a bank holding company, it could mean severe consequences for GM.

General Motors’ ownership of GMAC has kept the finance arm lending to dealers and car buyers, even as credit from traditional banks has dried up. If GMAC goes under, other institutions aren’t likely to step in to replace the credit lost by GM’s dealers and customers.

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.