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By
Edward Niedermeyer on December 10, 2008
In an SEC filing today, GMAC Financial Services warns that it may back away from its bank holding company status application, due to its inability to refinance some $38b in debt. That bank holding company status would make GMAC eligible for TARP funds, but without a federal rescue many see GMAC heading for bankruptcy court says Automotive News [sub]. Including GMAC. The Cerberus-owned finance firm warned that if it doesn’t receive holding company status by December 31, “it would have a near-term material adverse effect on GMAC’s business, results of operations and financial position.” Meaning it will be forced to sell of more assets (with no buyers lining up) and miss 2009 debt payments. To meet the Fed’s requirement, GMAC said it needs about 75 percent participation in its debt-swap offer. So far, participation is just over 20 percent. The good news? If you’ve got $20b or so rattling around and you want in, GMAC has extended its debt-swap deadline until December 12. Deep Throat breaks down the bad news thusly: “GM would have to write down its investment in GMAC likely to zero. The big problem is the floorplan issue for dealers. There are few replacement lenders right now, and those that will step up will offer harsher terms, curtailments, etc. That means less ability for GM to stockpile cars at dealer lots. OTOH, it’s possible that other captives, like Toyota’s finance arm, could seize an opportunity to play… especially if a GM dealer is also a Toyota dealer. But again, terms will be critical, and depends how much exposure these guys want and how much capacity they have. What’s interesting is that the bonds trade high with only 10-15% discounts from par. This is due to the recovery from finance assets being much better than from manufacturing assets.”
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Hi,
I’m Steve Feinberg and I will have all of your money, every last cent, and there isn’t a damn thing you can do about it. F you!
The phrase “checkmate” comes to mind.
Tex
p.s. Will someone please explain to me again how GM’s sales estimates in their “business plan” are going to happen if they can’t get loans approved? I must have missed that day of business school………..
Where is the outrage? GM gets a lousy few billion, and people out there with nooses to hang Maxine Walters. GMAC gets a $20 billion bailout — half that money going to Cerebus — and I don’t see the lynch mobs.
It seems most of the animus here is really anti-union, not anti GM, since I really don’t see how you can blame GMACs woes on union workers. This is pure management failure: going after subprime buyers to move the metal.
Either that, or I didn’t get the fax from the Republican House Cacus with todays talking points. IF so, sorry.
Rumor has it (from CNN (towards the end of the video): http://money.cnn.com/video/#/video/news/2008/12/10/news.121008.gmac.cnnmoney) that if GMAC goes under, ~5000 GM dealerships also go under. This could turn out to be a good thing for GM…
Jolo: That’s very very interesting although (and I really don’t know the answer to this one, not a finance guy), would the franchise agreement transfer to a new owner out of bankruptcy liguidation, or would it just be a sale of hard assets? Or, is there contract language that realistically allows GM to opt out of renewing the agreement in the even of an owner change or a liquidation? I certainly hope so.
Depending on which dealers go under (and if they stay dead), this could be interesting. I wonder what GM (or really, any truly large interest) could do with ownership of a significant percentage of their dealers? This could allow an opportunity for GM to reinvent it’s brand’s service image and customer experience. I’d bet there’s some legal restrictions o GM’s ability to compete with it’s own dealers at some level though.