GMAC extends debt exchange offers again
NEW YORK -- GMAC Financial Services late Friday extended and sweetened its offer to exchange $38 billion of its debt, saying that it had reached a tentative deal with representatives for a "substantial portion" of the debt.
GMAC is attempting to exchange the debt held by its divisions and mortgage business, Residential Capital LLC, for cash, new notes or preferred stock. On Friday, it extended the early delivery time for the offers until Tuesday and the expiration date for them until Dec. 26.
Friday's move marked the fourth time that GMAC has extended the deadlines, which had been set to expire on Friday.
The exchange is part of GMAC's bid to become a bank holding company and eligible for a piece of the U.S. government's $700 billion bank rescue plan that could shore up the company's finances and prevent it from either shuttering ResCap or filing for bankruptcy protection.
Earlier this week, GMAC warned that a failure to convert to a bank holding company would have a "material adverse effect" on its business.
GMAC's potential failure also would have a significant impact on its owners, automaker General Motors Corp. and the private equity firm Cerberus Capital Management LP.
GM, which owns a 49 percent stake in GMAC, has said it did not include any possible federal aid to GMAC in the restructuring plan that the automaker submitted to Congress in an effort to get its own government loans.
GMAC said Friday that the tentative deal is a significant step toward it getting the bondholder participation it needs to meet the Federal Reserve's requirement of at least $30 billion in regulatory capital in order to become a bank holding company.
But GMAC said that "significant" participation from other investors will still be needed to reach that goal.
GMAC has said that it needs about 75 percent participation on its offers to raise the needed capital. If it were unsuccessful it would be forced to withdraw its application to become a bank holding company.
So far, the company said only about $6.8 billion, or 24 percent, of the old GMAC notes and about $2.4 billion, or 25 percent, of the old ResCap notes have been tendered in the offers. The results don't include the notes covered by tentative deal, the company said.
The sweetened offer includes an increase in the annual dividend rate to 9 percent, along with new agreements related the new notes including restrictions on liens, subsidiary guarantees and asset sales, GMAC said.