GMAC gets 5 billion in TARP aid…

Ladies and Gentlemen, start your car-buying engines….A few days after receiving the newly coveted ‘bank-holding’ status from the FED, GMAC has now been approved for an additional 5 billion in aid via the TARP as well as an additional 1 billion directly to GM…

Via Politico:

Stepping into deeper waters to help the auto industry, Treasury Monday night added $6 billion to the $17.4 billion bailout announced Dec. 19, chiefly to help the financial arm of General Motors Corp.

Using financial markets rescue funds, Treasury will purchase $5 billion in senior preferred equity from GMAC LLC, and up to $1 billion more will be lent to GM itself so the automaker can participate in a rights offering at GMAC, which has wanted to reorganize itself as a bank holding company.

GMAC won approval from the Federal Reserve last week to become a bank holding company, but that was contingent on the auto and home loan provider raising at least $30 billion in capital. Treasury’s announcement would appear to move GMAC closer to that goal, and a GM spokeswoman was optimistic Monday night.

Still nada, zip, zilch for homeowners from Paulson…I would suggest anyone wanting a vehicle free of Congressional engineering standards buy now…HA!! Or take your chances on getting a Homer post Pelosi take-over….take a drive down your Miracle Mile of auto dealerships, we did yesterday and three of 10 are now empty lots,  including Jaguar…

thehomer

Breakdown on the stake taken by Treasury via CNN Money:

Under the agreement announced Monday to buy the senior preferred equity, GMAC must be in compliance with parts of the law Congress passed to bail out Wall Street.

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.

-snip-

The loan of up to $1 billion will be exchangeable at any time, at Treasury’s option, into the GMAC equity interests being acquired by GM in the rights offering. The loan will be secured and will have other terms and conditions. The ultimate level of funding under this facility will be dependent upon the level of current investor participation in the rights offering at GMAC.

December 29, 2008. Tags: , , , , , , , , , , , , , , , , , . Big 3, Economy, Labor Department, TARP, Unemployment Statistics, Wall St.

3 Comments

  1. ginaswo replied:

    DOW popped 184 on the day, methinks the markets loved it, GMAC announced they have lowered the FICO required for auto financing from 700 to 610 today, good news for the dealers and the cities who need the sales tax as well….

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  2. ginaswo replied:

    thanks Nick, I am glad to see TARP used for something other than covering Goldman Sachs counterparty losses via AIG by shoveling an endless supply of money with no strings their way…

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  3. Nick Maceus replied:

    After the auto industry had to fight tooth and nail to secure the $17 billion it needed to save itself from collapse, the federal government has kindly kicked in another $6 billion. The beneficiary: GMAC, the auto financing company that provides financing for most GM dealers and many of its customers. GMAC has struggled in recent months to borrow the money it needs to make loans, and last week the Fed approved the company’s request to become a bank holding company. The change in structure opened it up to new sources of funding, like the billions it’s receiving from the $700 billion of TARP funds, but also made it subject to additional regulations, including a requirement to convert 75 percent of its $38 billion in debt into stock. As part of the $6 billion infusion, the Treasury will invest $5 billion, on which it will receive an 8 percent dividend, and loan $1 billion to GM for it to invest in GMAC. GM has a 49 percent ownership of GMAC.

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