GMAC Extends Debt Swap Offer (WSJ - needs a ticket to read)
GMAC, the financing arm of General MotorsCorp., warned Wednesday it will drop its effort to become a bank holding company -- and see its business suffer further -- if it doesn't get the required support from bondholders for its $38 billion debt exchange offer.
"We continue to believe that pursuing the bank holding company status would offer GMAC the most opportunity to resume providing auto and mortgage financing to customers and businesses," said Gina Proia, a GMAC spokeswoman.
"The bond exchange is a critical part of the capital plan to meet the regulatory requirements to become a bank holding company," she said.
In the absence of these funds and because of GMAC's inability to tap alternative sources of cash, GMAC will have to further scale back lending to shore up its debt-heavy balance sheet.
This means that the financing arm, co-owned by GM and a group of investors led by Cerberus Capital Management LP, will be restricted in its ability to make auto loans, deepening the sales erosion at GM. A lack of funds also means that GMAC may have to pull the life support plug on its ailing mortgage unit.