GMAC. Bank or bust? We still don’t know. As we’ve reported at least twice previously, if the troubled lender failed to make the leap to hyper-suckle by Friday at 11:59 pm (i.e. get investors to swap out enough debt for equity to morph into a bank and scarf $6.3b or so from the Trouble Asset Relief Program, and a bunch more as federally secured debt), then the whole house of cards known as the domestic auto industry will come crashing down. Automotive News [sub] reports that GM spinmeister Gina Proia said the company expects to put out the results of the debt-for-equity swap in “the near term.” Let’s call that option C. Option A? GMAC did the deed but remained tight-lipped for the last two days because majority owners Cerberus never met a cloak of invisibility they didn’t wrap around their operation like Christo covering the Arc de Triomphe. After all, this is the same privately-held company that owns Chrysler, which expects Uncle Sugar to “lend” it $4b, despite the fact that we don’t know how Cerberus paid for it in the first place and/or who owns the paper on what now, after the sale and (presumably) deep borrowing against assets. And now, option B…
The GMAC debt-for-equity swap didn’t succeed, and the players have spent the weekend conspiring to end run the laws set-up by Congress to protect the sanctity of the American banking system on the voters’ behalf.
This seems the most likely scenario. Especially if you savor this little News McNugget: “The bank holding company approval was not contingent on the bond exchange,” Proia told Reuters. “But the debt swap was contingent on GMAC getting the bank holding company approval.” Huh? As far as I know, even though the Fed said, yup, sure, you can do that, GMAC still had to satisfy U.S. banking law. In other words, the Fed had pre-approved the transformation contingent on the swap.
We’ll keep you posted on the end, or the end run.
Given DC’s recent track record, if GMAC failed to cross the goal line, they’ll simply move it. Detroit will be able to try and keep trying ’til they get it right!
“Nothing succeeds like failure” seems to be the new mantra in DC
“failed to make the leap to hyper-suckle”
Leap to hyper-suckle! Oh, man! That would really be funny, if we weren’t all the suckers.
So they got the status… which means they got the swap done?
AP are saying the debt swappers wanted Fed pre-approval first before further consideration. That’s where the Fed bank status pre-approval comes from. They still have to pass the equity test.
An interesting aspect of the Fed pre-approval order appears to be that GM must reduce their ownership stake to 10% of GMAC, while Cerberus must reduce to 33%. The remainder would be held by a government trustee.
GMAC quiet on bailout hurdle after deadline passes
Gotta repeat the praise for “hyper suckle”.
Why so much hang up over the rules, RF. They are making them up as the go along, no?
Lastly, the government trustee is likely going to end up killing them. See history of Freddie and Fannie for more information.
I shall repeat myself: it all depends on what the offer said. If it was delivery of the securities and other papers to a certain person at a certain place by the end of Friday, that would be one thing.
On the other hand, if the stuff had to be mailed by Friday (or Fed Ex-ed or whatever), that would be a different story — one that might take a few days to untangle.
Another issue is that a lot of European banks and businesses were closed on Friday.
I don’t know what provisions governed those institutions and their customers.
My suggestion is to wait until the Fat Lady hits high C.
Hopefully, it gets mostly postponed until after Wednesday, when maybe some more honest folks are brought in.
(-wait, I’m already laughing at that one! :) :) :) )
*Guaranteed though, ‘The Man Behind The Curtain’ (Stephen A. Feinberg) at Cerberus is and has been calling in all the Kickbacks, and probably signing all the Swap Me/Do You Markers he can possibly lay his hands on.
+++Oof! -I just remembered, GMAC got into the Home Mortgage Business just in time to write a bunch of bad Sub-Prime tickets, too.
http://www.nytimes.com/2008/12/06/business/06chrysler.html?_r=1
http://www.forbes.com/2008/12/09/chrysler-cerberus-bailout-oped-cx_dg_1210gerstein.html
http://www.businessweek.com/magazine/content/07_42/b4054043.htm?campaign_id=rss_as
http://www.businessweek.com/magazine/content/07_52/b4064028904522_page_2.htm
http://www.businessweek.com/magazine/content/05_40/b3953110.htm
I don’t consider the silence as good, I consider it as ominous. They would have been happy to loudly trumpet an apparent success / victory (ie, free money given freely to reward their failure / defeat).
They are probably under a cone of silence. The silence was imposed upon them because the terms are so onerous to the American public; so generous to GMAC and the dog with three suckling mouths, that the powers told them to keep the terms on the qt until they can quietly release them under the cover of some other major attention-getting news story, such as some confusing event occuring somewhere in some other country.