The financing arm of General Motors Corp (GM) wasn’t immediately saying early yesterday whether it had met a midnight deadline to clear a final hurdle in its quest to become a bank holding company, which would allow it to access billions in federal bank bailout money.
GMAC Financial Services LLC already received the Federal Reserve’s stamp of approval earlier this week, but needed to complete a complicated debt-for-equity exchange by 11:59pm EST on Friday.
In an e-mail at 12:45am on Saturday morning, GMAC spokeswoman Gina Proia did not say whether the company had met the deadline. She didn’t respond to repeated requests for further comment.
Analysts have speculated that without financial help, GMAC would have had to file for bankruptcy protection or shut down, dealing a serious blow to GM’s own chances of survival.
GMAC may have applied for up to US$6 billion in funds from the government’s financial bailout program and could potentially sell US$17.5 billion in government-backed debt to shore up its capital position, CreditSights said.
GMAC has said without bank holding company status, it would likely have to sell assets and take other extraordinary measures to make good on its obligations. The company, which makes auto loans for GM’s customers, has lost US$7.9 billion over the last five quarters.
“While GMAC has not quantified its capital injection request from the Troubled Assets Relief Program, we estimate the company could have applied for up to about US$6.3 billion,” CreditSights analysts Richard Hofmann and Adam Steer said in a report late on Thursday.
This is based on capital injections being limited to 3 percent of risk-weighed assets, the analysts said.
GMAC may also be eligible to sell up to US$17.5 billion in bonds backed by the Federal Deposit Insurance Corp if approved to sell debt under the government’s Temporary Liquidity Guarantee Program (TLGP), CreditSights said.
Issuance under the TLGP is limited to 125 percent of outstanding, unsecured debt that a company issued before Sept. 30, and that matures before June 30 next year, the analysts said.
GMAC’s bonds surged on the news of the approval of bank holding company status. The firm’s 5.625 percent bond due next year jumped US$0.27 to US$0.94 on the dollar, MarketAxess said.