UPDATE: GMAC Gets Green Light From FDIC To Issue Cheap Debt
22 Mai 2009 - 12:33AM
Dow Jones News
GMAC LLC has gotten the much-awaited go-ahead from the Federal
Deposit Insurance Corp. to sell cheaply priced debt insured by the
FDIC, according to a person familiar with the matter.
In addition, GMAC, the lending affiliate of General Motors Corp.
(GM), has been granted exemptions from federal officials that widen
the scope of its lending activities to GM, the source said.
The moves underscore the extraordinary lengths the government is
going to in order to prop up the U.S. auto industry. GMAC, as a
financier of GM, and now Chrysler LLC, vehicles, is vital to
federal efforts to resuscitate the ailing auto makers because it
provides crucial funding to their dealers and consumers.
GMAC makes loans to auto dealers who use the funds to stockpile
their inventory of new vehicles. GMAC also lends to consumers
buying these vehicles.
The ability to issue cheap FDIC-backed debt was a central plank
in GMAC's transformation to a bank holding company in December.
The amount of FDIC-backed debt that GMAC may issue isn't known.
But earlier this month, a company official estimated that this
amount could be between $5 billion and $10 billion.
"When we applied for bank-holding-company status," said Robert
Hull, GMAC's chief financial officer, in an interview earlier this
month, this federal program "was definitely something we were
seriously considering."
In addition, the Federal Reserve granted GMAC waivers on rules
that separated the lending activities of GMAC Bank from GMAC's
auto-finance business. Before the waiver, GMAC Bank was limited in
its ability to make loans to both a GM dealer and consumers who
bought GM cars from that dealership, because the auto maker is a
major stakeholder in GMAC. This exemption removes that constraint,
widening the scope of GMAC's lending to GM customers.
The U.S. Treasury Department is also poised to inject more than
$7 billion into GMAC, the first installment of a new government aid
package that could reach $14 billion, according to a Wall Street
Journal report Thursday.
Earlier this month, the government said it would provide more
federal funds to GMAC after the company assumed the mantle of
lender for Chrysler vehicles. Chrysler is in the midst of a
restructuring in bankruptcy court.
In addition, GMAC, on the heels of its bank registration in
December, received $5 billion under the Treasury's Troubled Asset
Relief Program, or TARP. In exchange, the Treasury received GMAC
preferred stock.
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 by the end of this month 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