GMAC, the primary lender to General Motors Corp. dealers, was unable to raise enough capital to become a bank holding company and qualify for federal aid, intensifying concern that it will seek bankruptcy protection.
The $38 billion debt exchange by the lender and its Bloomington-based mortgage unit, Residential Capital, didn't lure enough bondholders, leaving GMAC shy of the $30 billion in regulatory capital demanded by the Federal Reserve for it to become a bank, GMAC said Wednesday in a prepared statement. GMAC last month asked bondholders to tender their securities for as little as 55 cents in cash or a combination of new notes and preferred stock, which would count as regulatory capital.
GMAC is trying to skirt a collapse by becoming a bank and gaining access to the Treasury's $700 billion rescue fund. As a bank, the company would also be able to sell bonds backed by the Federal Deposit Insurance Corp., giving the finance company new funding after being shut out of the public market for bonds backed by auto loans for the past six months.
"Becoming a bank holding company was probably their last lifeline," said Mirko Mikelic, senior portfolio manager at Fifth Third Asset Management in Grand Rapids, Mich. "There's an extremely high likelihood that they would have to file for bankruptcy" if they can't get access to the Treasury's rescue fund by year-end, he said.
If GMAC files, the restructuring will probably take three to 12 months, Mikelic said.
The company extended the early delivery deadline for debt holders by three days, to 5 p.m. Friday. It was the third extension of the deadline.
Less than 25 percent of GMAC's and Residential Capital's existing debt covered by the exchange offer has been tendered, the statement said. The Detroit-based company needs about 75 percent participation for the plan to work, the statement said. If the goal isn't met by the end of this week, GMAC intends to withdraw its Fed application.
