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GMAC future hinges on vote
Auto finance company says future rides on bondholders’ acceptance of debt-for-equity exchange.

By David Goldman, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) — GMAC LLC is still counting a crucial vote Monday that could determine if the auto finance company turned bank can stay afloat.

GMAC bondholders had until midnight last Friday to accept a bond exchange for corporate equity that would provide GMAC with necessary capital.

The company, which provides auto loans to General Motors’ customers and dealers, has been trying to convert 75% of its $38 billion of issued debt into preferred stock holdings to raise $30 billion in capital necessary to become a bank.

But bond holders have been reluctant to make the exchange. Earlier last week, GMAC said only about 58% of its bond investors were committed, so it extended the deadline to Friday – the fourth such extension.

“The offer did expire on December 26, at 11:59 p.m., as planned,” said GMAC spokeswoman Gina Proia. “We have not yet finalized results. We intend to make them public in the near term.”

The company is currently 51% owned by Chrysler’s parent company Cerberus Capital Management and 49% by GM. General Motors (GM, Fortune 500) and Chrysler were set to receive $4 billion each in emergency aid from the Treasury Department’s Troubled Asset Relief Program.

GM said Monday it was hammering out the details of its federal loan. “GM continues to work with the federal government on the final stages of the loan agreement and we remain confident a timely signing of the federal loan agreement will occur prior to our needs,” a GM spokesman said Monday afternoon.

GM has previously stated that GMAC’s viability is critical to the automaker’s recovery. GMAC has lost $7.9 billion over the past five quarters, mostly from risky subprime mortgage bets made by its Residential Capital division. The holdings plummeted in value when the housing market began to decline in 2007.

Despite lacking sufficient capital, GMAC won approval from the Federal Reserve last Wednesday to become a bank holding company. The Fed cited “emergency conditions” for its approval, saying the company was important to the future success of GM.

As part of the conditions outlined by the Fed, Cerberus must reduce its stake in GMAC to 33% and GM’s share must drop to less than 10%. Cerberus will distribute the remainder of its stake to its investors and GM’s share will go into an independent trust to be sold off within three years.

The status change would give GMAC access to much-needed funds from TARP and other government bailout programs.

According to a recent note from CreditSights analyst Richard Hofmann, GMAC requested a TARP capital investment and may get as much as $6.3 billion. The analyst also said the company could issue up to $17.5 billion in government-backed debt through the FDIC Temporary Liquidity Guarantee Program to shore up its capital position.

And even if it cannot raise the $30 billion that the Fed mandates for bank holding company status, analysts think the Fed will be satisfied with the effort.

“The Fed pointed to GMAC’s successful efforts to raise additional capital in approving the company’s bank holding company application,” said Hofmann. “With the primary regulator on board, the capital raise machinations seem almost a moot point.”