GMAC Receives US$5.0B Investment from the US Treasury

30 December 2008

GMAC Financial Services has sold US$5.0 billion of GMAC’s preferred membership interests and warrants to the US Department of the Treasury as a participant in the $700-billion Troubled Assets Relief Program (TARP) established under the Emergency Economic Stabilization Act of 2008.

GMAC received approval of its bank holding company application from the US Federal Reserve Board on 24 December. (Earlier post.)

The company says it intends to act quickly to resume automotive lending to a broader spectrum of customers to support the availability of credit to consumers and businesses for the purchase of automobiles.

GMAC also announced that GM and an affiliate of Cerberus Capital Management contributed to GMAC the $750 million subordinated participations in the $3.5 billion senior secured credit facility, as amended, between GMAC and Residential Capital, LLC in exchange for new common equity of GMAC. In addition, GMAC announced that GM and an affiliate of Cerberus Capital Management entered into agreements to purchase US$1.25 billion of new common equity. The US Treasury and GM intend to enter into an agreement for the Treasury to fund GM’s share of the new common equity.

GMAC also announced that the conditions to its previously announced separate private exchange offers and cash tender offers have been satisfied and that GMAC has accepted all of the validly tendered GMAC old notes and ResCap old notes. The GMAC offers and the ResCap offers are expected to settle promptly.