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| GMAC Financial Services has gained access to more than $15 billion from the U.S. government — which now sits on its board.The Detroit-based bank-holding company was approved to issue up to $7.4 billion in new debt guaranteed by the Federal Deposit Insurance Corporation, according to an FDIC announcement Thursday. The transaction is part of the Temporary Liquidity Guarantee Program, which expires on Oct. 31.
GMAC — parent to Residential Capital LLC — agreed to pay a fee for the guarantee, committed to develop a funding plan and promised to maintain bank capital well above required regulatory minimums. “The plan will reflect GMAC’s management of the bank’s funding and deposit costs with a focus on diversifying funding sources and reducing the bank’s overall cost of deposit funding,” the FDIC said. In addition, the U.S. Department of the Treasury invested $7.5 billion in the company, a GMAC press release yesterday indicated. The investment was in the form of “mandatorily convertible preferred membership interests” and warrants — which were immediately exercised. While the Treasury’s investment is outstanding, GMAC is prohibited from paying dividends and subject to restrictions on executive compensation, a filing today with the Securities and Exchange Commission said. But that might be a while. “Following an initial public offering of GMAC, the Treasury will proceed with an orderly liquidation of its interest in GMAC, beginning no later than the seventh anniversary of any such initial public offering, with the goal of liquidating between 10 percent and 20 percent of the Treasury’s interest in GMAC’s equity securities in each succeeding year,” the SEC filing said. GMAC also said that the Federal Reserve has expanded an exemption to originate GM-related assets at Ally Bank — the successor institution to GMAC Bank which was re-branded this month. But as part of the government assistance, GMAC said it agreed to reconstitute its board of directors, including naming two directors from the Treasury — Robert T. Blakely and Kim S. Fennebresque — and agreeing to quickly name three other independent directors. The new board will consist of nine directors, including Cerberus appointee Stephen Feinberg. Board members who resigned were T.K. Duggan, Douglas A. Hirsch, Robert Hull, Samuel Ramsey and Robert W. Scully. “These actions represent another major step in stabilizing and strengthening GMAC,” GMAC Chief Executive Officer Alvaro G. de Molina, who will remain a director, said in the statement. GMAC said it still needs to raise $5.6 billion in new capital. A stress test earlier this month by the Treasury indicated GMAC LLC needed “to augment the capital buffer with $11.5 billion of Tier 1 Common/contingent Common of which $9.1 billion must be new Tier 1 capital.” |
