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ResCap bondholders see red
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Residential Capital bondholders may form a group to oppose the distressed mortgage-finance company's $12.8 billion debt exchange offer, according to a lawyer approached by investors.
Bondholders are unhappy with ResCap's offer because it would push back maturities and require some to exchange the debt at a discount, said Evan Flaschen, partner and chair of the financial restructuring group at Bracewell & Giuliani in New York. Flaschen said he's been approached by about a dozen investors who may seek his representation.
"It's pretty preliminary," Flaschen said in a telephone interview. "The kinds of calls I've been getting are: 'I've heard there might be a group, let us know, we'd like to be included.'"
ResCap, the Bloomington-based mortgage-finance company owned by GMAC, is trying to avoid bankruptcy. It is offering to exchange notes maturing in 2008 and 2009 for as much as 100 cents on the dollar of new 2010 debt. Securities due in 2010 through 2015 would be traded for no more than 80 cents on the dollar's worth of debentures maturing in 2015.
Owners of the longer-dated ResCap securities are particularly dissatisfied with the mortgage lender's offer, Flaschen said.
The exchange offer is contingent on ResCap getting a new $3.5 billion credit line from GMAC, which is owned by General Motors Corp. and an investor group led by Cerberus Capital Management. GM and Cerberus said last week they may agree to guarantee $750 million of the debt package if ResCap defaults.
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