2nd UPDATE: GMAC 1Q Loss Widens On Credit Woes, Weak Economy
05 Mai 2009 - 8:12PM
Dow Jones News
GMAC LLC reported Tuesday a wider loss for the first quarter,
and company officials said the amount of cheap federal funding it
can potentially tap is diminishing.
GMAC, the lender affiliated with General Motors Corp. (GM), is
waiting for approval from the Federal Deposit Insurance Corp. to
issue FDIC-insured debt under the Temporary Liquidity Guarantee
Program. Under the program's guidelines, as time passes without
such approval, the amount of debt GMAC can raise decreases.
Gaining access to cheap capital through this program was a major
driving force behind the cash-strapped lender's bank registration
in December. The struggling auto lender faces large debt maturities
this year and it hopes to use capital raised through the TLGP to
repay those maturing debts.
GMAC reported a first-quarter loss of $675 million, widening
from a loss of $589 million a year earlier. Its results were aided
by a $631 million after-tax gain from retiring debt. Without this
gain, GMAC's loss totaled about $1.3 billion amid continued harsh
market conditions that drove up credit provisions and lowered
revenue.
GMAC last week assumed the mantle of lender for new financing to
Chrysler LLC dealers and consumers as the auto maker restructures
in bankruptcy court. As part of this arrangement, the government
will provide additional funding to GMAC though the size of these
funds isn't yet known.
Overall, GMAC's net revenue for the first quarter fell 8.8% to
$2.2 billion. Credit-loss provisions rose 78% from a year ago to
$843 million.
Credit woes continued to mount for the auto unit, with 3.08% of
borrowers at least a month behind their car payments, compared with
2.42% a year ago.
GMAC's mortgage business, which includes struggling subprime
lender Residential Capital LLC, reported a loss of $125 million,
aided by a $900 million pretax gain stemming from GMAC forgiving
ResCap debt. ResCap, whose subprime-loan business blew up, has been
struggling to turn around its fortunes.
GMAC now estimates that if it's approved for TGLP, it could
raise between $5 billion and $10 billion. Earlier, GMAC had
calculated it could raise $12 billion.
More than four months after turning itself into a bank, GMAC is
still waiting for the green light from the FDIC to sell cheaply
priced debt. Financial institutions ranging from Citigroup Inc. (C)
to General Electric Corp.'s (GE) General Electric Capital Corp.
raised financing through the program during the credit crisis.
Guidelines for the program dictate that the amount of guaranteed
debt a company can issue depends on the debt maturities a company
faces within a certain time period. As GMAC pays down maturing
debt, the amount of funds it can issue under this plan shrinks.
GMAC said it could pay off its maturing debt this year without
federal help, but doing so would probably reduce the amount it
could lend consumers. The lender has $30.6 billion of debt maturing
in 2009, including $11.8 billion of unsecured debt.
"When we applied for bank holding company status," said Robert
Hull, GMAC's chief financial officer, "TLGP was definitely
something we were seriously considering."
The company sharply scaled back lending to consumers towards the
end of 2008 amid a paucity of capital. It quickened its lending
pace after getting $5 billion under the U.S. Treasury's Troubled
Asset Relief Program on the heels of its bank registration.
Still, lending levels remain way off from early 2008. GMAC
funded 17% of GM's retail sales in the first quarter, compared with
49% a year earlier.
"We hope to get back to where we were before," said CFO
Hull.
GMAC is jointly owned by GM and an investor group led by
private-equity firm Cerberus Capital Management LP. The auto maker
and the investor group will significantly scale back their
ownership in GMAC as a condition of the lender becoming a
bank-holding company.
-By Aparajita Saha-Bubna, Dow Jones Newswires; 617-654-6729;
aparajita.saha-bubna@dowjones.com
(Kerry E. Grace contributed to this report.)