GMAC Holders Agree to Revised Swap Terms, Lawyer Says
GMAC LLC investors holding about $10.5 billion of bonds agreed to sweetened terms of a debt swap, bringing the auto and home lender closer to its goal of becoming a bank and getting a federal bailout, Bloomberg reported.
"The committee has unanimously agreed to support the offer," said Andrew Rosenberg, partner at Weiss, Rifkind, Wharton & Garrison LLP, in an interview today from his New York office. Rosenberg represents the bondholders, who had balked at the Detroit-based company's proposed $38 billion debt exchange. The offer was designed to help avert a collapse and pave the way for GMAC to convert to a bank holding company.
The switch could give GMAC access to the Treasury's $700 billion rescue fund and allow it to sell bonds backed by the government. If the exchange isn't completed by the end of the year, GMAC said in filing last month there is a "significant risk" it will default on its debt. A bankruptcy by GMAC, the primary lender to General Motors Corp. dealers, may put up to 40 percent of GM's U.S. dealerships out of business, Martin NeSmith, a member of GM's National Dealer Council, said last week.
"They're shut out of the credit markets right now," said Andrew Harding, chief investment officer for fixed income at Allegiant Asset Management, in a Bloomberg Television interview. Becoming a bank "would bring them back in, and at a very favorable rate. It is a very big step," said Harding, who manages $20 billion in fixed-income assets from Cleveland.