GMAC Gets $5 Billion in TARP Funds

Reprinted from The Monitor


GMAC said it has sold $5.0 billion of GMAC's preferred membership interests and warrants to the U.S. Department of the Treasury as a participant in the Troubled Assets Relief Program (TARP) established under the Emergency Economic Stabilization Act of 2008. In return, GMAC will be subject to additional regulation and must be in compliance with the executive compensation and corporate governance requirements of Section 111 of the Emergency Economic Stabilization Act.

Separately, the Treasury Department said it has agreed to lend up to $1 billion to General Motors so that General Motors (GM) can participate in the rights offering at GMAC in support of GMAC's reorganization as a bank holding company. In its announcement, GMAC said, "As a bank holding company, GMAC has improved access to funding to provide financing to consumers and businesses. In particular, the company 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 $1.25 billion of new common equity. The U.S. 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.

Editor's Note: GMAC was one of the largest originators of mortgages for many years. This statement and action is a clear indication they intend to get back to their original purpose, which was to provide access to credit for people buying GM cars and trucks.

Stu
Southern Lending Solutions