Treasury extends $6 billion in aid to GMAC, GM

WASHINGTON -- The U.S. Treasury Department late today said it will commit $6 billion of taxpayer money to GMAC LLC “as part of a broader program to assist the domestic automotive industry in becoming financially viable.”

The action was the latest in a lengthy series of emergency government moves aimed at easing the worst credit crisis since the 1930s and limiting the severity of a year-long recession.

In an announcement, the department said it will purchase a $5 billion stake in the lender, which has been jointly owned by Cerberus Capital Management LP and General Motors.

In addition, the government is lending up to $1 billion more to GM so that it can participate in a rights offering at GMAC connected to the lender’s reorganization as a bank holding company. The $1 billion comes in addition to $13.4 billion the government has promised GM by mid-February to keep it from running out of cash.

Separately, GMAC said it had raised enough capital through a debt-for-equity offering to satisfy Federal Reserve requirements under today's agreement. The company had hoped to raise $30 billion in capital through the offering. GMAC did not indicate how much capital it raised.

The Federal Reserve Board on Dec. 24 approved a GMAC application to become bank holding company.

All of the funds come from $700 billion Congress and President Bush approved in October to rescue financial institutions.

The Treasury Department said GMAC must comply with the same conditions as other recipients of aid from the rescue funds, including limits on executive pay and requirements for corporate governance.

The bonus pool available to the top 25 GMAC executives was cut by 40 percent from 2007 levels, a Treasury official told reporters on a conference call.

GMAC over the last five quarters has posted losses of $7.9 billion. The credit crunch has forced the company to reduce its lending both to auto dealers and their customers.

As recently as Sept. 30, GMAC provided dealership inventory financing for 80 percent of GM vehicles worldwide. Two months ago, an unscientific Automotive News survey of U.S. GM dealers found that four-fifths floorplanned with GMAC. Of those dealers, half said they were looking for new lenders.

In addition to providing dealer inventory financing, GMAC remains a major source of retail financing. Through Sept. 30, the company says it financed 42 percent of combined loan and lease volume for GM's North American dealers.

GMAC, in a statement, said it will be able to resume lending to a broad spectrum of automotive customers.

Reuters contributed to this report

Announces satisfaction of conditions to and expiration of its notes exchange offers

NEW YORK, Dec. 29 /PRNewswire/ -- GMAC Financial Services today announced

that 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 established under the Emergency Economic Stabilization Act of 2008. The sale was completed today.

GMAC also announced that General Motors Corp. (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. The GMAC offers and the ResCap offers are expected to settle promptly.

GMAC received approval of its bank holding company application from the U.S. Federal Reserve Board on Dec. 24, 2008. 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.

About GMAC Financial Services

GMAC Financial Services is a global finance company operating in and servicing North America, South America, Europe and Asia-Pacific. GMAC specializes in automotive finance, real estate finance, insurance, commercial finance and online banking. As of Dec. 31, 2007, the organization had $248 billion in assets and serviced 15 million customers.

WASHINGTON -- The Treasury Department today announced that it will purchase $5 billion in senior preferred equity with an 8% dividend from GMAC LLC as part of a broader program to assist the domestic automotive industry in becoming financially viable.

Under the agreement GMAC must be in compliance with the executive compensation and corporate governance requirements of Section 111 of the Emergency Economic Stabilization Act, as well as enhanced restrictions on executive compensation.

GMAC will issue warrants to Treasury in the form of additional preferred equity in an amount equal to 5% of the preferred stock purchase that will pay a 9% dividend if exercised.

Additionally, the Treasury has agreed to lend up to $1 billion to General Motors so that GM can participate in a rights offering at GMAC in support of GMAC's reorganization as a bank holding company. This commitment is in addition to the assistance previously announced for GM on Dec. 19. This loan will be exchangeable at any time, at Treasury's option, into the GMAC equity interests being acquired by GM in the rights offering. Furthermore, this loan will be secured and will have other terms and conditions as outlined in the attached term sheet. The ultimate level of funding under this facility will be dependent upon the level of current investor participation in the rights offering at GMAC.

Treasury exercised this funding authority under the Emergency Economic Stabilization Act's Troubled Asset Relief Program (TARP). The preferred stock purchase and the loan to support GMAC's rights offering are part of an auto industry-focused TARP program that will include the $17.4 billion in assistance for domestic automakers announced earlier this month.

As previously indicated, Treasury will work with Congress and the President-elect's transition team on the appropriate timing for release of the remainder of the TARP funds to support financial market stability.