GMAC Debt Exchange Short of 75% Needed to Become Bank
By Caroline Salas
Dec. 18 (Bloomberg) -- GMAC LLC, the auto and home lender trying to rescue itself by becoming a bank holding company, remains short of the 75 percent participation needed for a $38 billion debt swap designed to bolster its capital.
Holders of $16.9 billion, or 58 percent, of eligible GMAC notes and $3.5 billion, or 38 percent, of securities issued by its Residential Capital LLC mortgage unit had tendered by the end of yesterday, GMAC said in a federal filing today. The deadline for early delivery is tomorrow, and Pacific Investment Management Co., one of the biggest holders, may back out of the exchange, Dow Jones reported today.
“We’re disappointed with the follow-through participation through yesterday,” said GMAC spokeswoman Gina Proia, in an interview. “However, we’re hopeful we can still achieve the needed participation to meet the capital requirement by Friday.”
GMAC, the primary lender to General Motors Corp. dealers, sweetened terms of the debt swap last week and has extended the deadline five times since announcing the deal in November. The exchange is part of Detroit-based GMAC’s plan to convert to a bank holding company and gain access to federal bailout programs.
If the exchange isn’t completed by the end of the year, there is a “significant risk” the firm will default on its debt, GMAC said in a filing last month. Analysts have said bankruptcy may follow.
Mark Kiesel, executive vice president at Pimco, declined to comment on his firm’s participation. Pimco, based in Newport Beach, California, manages the world’s biggest bond fund.
GMAC’s $5.5 billion of 6.875 percent bonds due in September 2011 fell 0.5 cent to 45 cents on the dollar at 11:18 a.m. New York time today, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The debt yields about 43 percent.
To contact the reporter on this story: Caroline Salas in New York at
csalas1@bloomberg.net
Last Updated: December 18, 2008 11:45 EST
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I have had a $25K GMAC Bond since 2002 that pays 7.00%. My broker recently warned me they were in trouble. So it goes...