Saturday, December 27, 2008

Now is not the time to eat alone

(PIMPCO must have said NYET. Quite a game of chicken they are playing. GMAC debt is senior to the TARP funds that GMAC hopes to get by becoming a BHC. The catch is that GMAC needs for PIMPCO to tender its' bonds (and take a loss) to hit the required 75% tender threshold (to become a BHC). PIMPCO must be betting that the Federales will not take away the BHC status they granted on Christmas Eve. PIMPCO gets to have their cake (not take a loss by tendering the bonds)- and eat it to (have the GMAC debt rally since it is senior to TARP funds). Pretty sneaky eh? Bet the ~60% who did tender and did take a loss will be a bit ticked off. Tough luck folks, in 'this thing of ours' it's members only. - AM)

5 hours ago

Even after a crucial deadline came and went, the financing arm of General Motors Corp. remained silent Saturday on whether it cleared a final hurdle to become a bank holding company and gain access to billions in federal bailout money.
Analysts have speculated that if GMAC Financial Services LLC doesn't obtain financial help it would have to file for bankruptcy protection or shut down, which would be a serious blow to parent GM's own chances for survival.
GMAC had received the Federal Reserve's approval to become a bank holding company earlier in the week, but the approval was contingent on the ailing auto and home loan provider completing a complicated debt-for-equity exchange by 11:59 p.m. EST Friday.
In an e-mail early Saturday, GMAC spokeswoman Gina Proia did not provide any specifics.
"The offer did expire yesterday at 11:59 p.m. as planned. We have not yet issued final results but intend to in the near term. I have no further comment on the exchange until then," she wrote.
Becoming a bank holding company would both qualify GMAC to access the government's bank rescue funds and support GMAC loans to car buyers and GM dealerships. GM owns 49 percent of GMAC.
The Federal Reserve apparently needed to see that bondholders were willing to inject more capital into GMAC. The bondholders needed reassurance that the Fed would approve GMAC's application to qualify for federal aid.
If the auto lender failed to meet the exchange deadline, the repercussions for General Motors could be dire, according to Erich Merkle, an auto industry analyst with Crowe Horwath LLP.
General Motors' ownership of GMAC has kept the finance arm lending to dealers and car buyers, even as credit from banks has dried up. If GMAC goes under, other institutions aren't likely to step in to replace the credit lost by GM's dealers and customers.
"It would make a difficult selling environment for GM that much more difficult," Merkle said in an interview Saturday.
The Fed's action Wednesday came as GMAC was struggling to get bondholders to convert 75 percent of their debt into equity of the company.

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