UPDATE: GMAC Plans Sale of Government-Backed Bonds - Source
02 Juni 2009 - 8:13PM
Dow Jones News
GMAC LLC, the auto and home lender, is planning to sell new
bonds backed by the U.S. government, according to a person who has
seen the deal.
The bonds, which will mature in December 2012, will be sold
under the Federal Deposit Insurance Corporation's Temporary
Liquidity Guarantee Program, or TLGP, meaning it's backed by the
full faith and credit of the U.S., a second person confirmed.
Banc of America Securities LLC, Barclays, Deutsche Bank and JP
Morgan are underwriters on the sale.
Gina Proia, a GMAC spokeswoman, declined to comment.
GMAC converted to a bank-holding company last year and is seen
as crucial to the survival of Chrysler LLC and General Motors Corp
(GM).
It got the much-awaited go-ahead to sell cheaply priced debt
insured by the FDIC on May 21. Under this arrangement, GMAC can
issue as much as $7.4 billion of FDIC-guaranteed debt.
GMAC suffered a net loss of $675 million in the first quarter,
wider than a $589 million loss a year earlier.
The Treasury Department confirmed in May that it will inject
$7.5 billion in GMAC, which needs to figure out by June 8 how it
will fill an $11.5 billion equity hole. The Treasury investment
includes $4 billion earmarked for loans to Chrysler dealers and
consumers. The remaining $3.5 billion will go to strengthen GMAC's
capital position.
The Treasury also said it would swap $884 million of its
existing preferred-stock investment for common stock, giving the
government a 35.4% equity stake in the lender. This stake could
increase to more than half if GMAC, amid potential mounting losses
and meager capital levels, were to convert the government's
investments into common equity.
-By Kate Haywood and Romy Varghese, Dow Jones Newswires;
201-938-2348; kate.haywood@dowjones.com (Aparajita Saha-Bubna
contributed to this report.)