Struggling finance firm GMAC LLC said Wednesday that bondholders tendered $21.2 billion in notes in its bid to raise capital for its new status as a bank-holding company.
The lender's goal had been to raise $30 billion by converting 75% of its issued debt into preferred stock holdings. The offer expired Friday after having been extended four times.
Since then, GMAC has received commitments from the federal government for $6 billion in aid and already announced it would ease requirements on auto loans. GMAC, the finance arm of General Motors Corp., had been cracking down on auto lending amid growing losses and its inability to tap into funding.
Under GMAC's exchange offer launched Nov. 20, investors were offered combinations of new notes, preferred stock and cash.
GMAC didn't say how much capital was raised as a result of the debt exchange, but spokeswoman Gina Proia said it did "contribute significantly" to the firm's capital-raising efforts. GMAC will likely disclose the figure when it reports its fourth-quarter resules, she said.
The company said Wednesday that about $17.5 billion in GMAC old notes and $3.7 billion in old notes from its ailing mortgage arm, Residential Capital LLC, were tendered. As part of the deal, GMAC will issue $11.9 billion in new senior notes and about $2.6 billion in certain perpetual preferred stock.
GMAC said 59% of its old notes had been tendered to the offer, little changed from last week. It also said the cash elections for the offers were oversubscribed, so each eligible holder who elected to receive cash will receive a portion in cash, with the balance exchanged into new notes.
The lower debt level will free up capital and help GMAC satisfy the capital that is required to become a bank-holding company. As a bank, the lender gets access to federal funds and can sell government-backed debt at a time when it has little in the way of alternative funding sources.
On Monday, GMAC got commitments from the federal government that included $5 billion under the Troubled Asset Relief Program -- a $700 billion fund originally designed to help banks. The Treasury also said it offered a new $1 billion loan to GM so the auto maker can participate in a rights offering at GMAC.
The bailout and debt swap are critical to GM's survival plan, as the auto maker retains a significant stake in GMAC and depends on the firm to provide the bulk of funding to GM's dealers and retail buyers. GM secured its own $13 billion federal lifeline earlier this month.
GMAC issued 22% fewer auto loans around the globe in the third quarter compared with a year earlier. Following news of the GMAC bailout, GM said it would offer 0% financing on some models in a bid to jump-start sales.
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