GMAC Financial Services, a portfolio company of Cerberus Capital Management, is restructuring $38 billion of its debt to meet regulatory requirements necessary for bank holding company status.
The company has submitted an application for bank holding company status to the US Federal Reserve Board of Governors and an application for access to the US government’s $250 billion bank bailout to the US Treasury.
GMAC announced its intention to restructure its debt and attempt to become a bank holding company on 30 October.
The company has launched private exchange offers and cash tenders for $38 billion of outstanding GMAC and ResCap debt to increase capital and reduce debt. The exchange offers will expire on 18 December and tendered old notes may be withdrawn prior to 4 December.
GMAC warns in a statement that the company may not obtain bank holding company status and also cannot guarantee the transactions will be completed or that they will result in sufficient capital to satisfy the capital requirements.
In 2006, a Cerberus-led consortium purchased 51 percent of GMAC for $14 billion, with $6 billion coming from the New York-based firm’s own funds. The mortgage and auto lender, formerly the financing wing of General Motors, has been severely hit by the subprime mortgage crisis and general credit market turbulence.
General Motors, which owns 49 percent of GMAC, Ford Motor and Chrysler are currently testifying before the US Senate Banking Committee is search of $25 billion in emergency federal loans to stave off potential bankruptcy.