As a burgeoning fuel crisis unseats the credit crunch as the downer du jour, the subprime woes of GMAC and ResCap are bubbling away under the surface. Reuters reports that GMAC has completed a $60b refinancing and funding package in hopes of returning its ResCap mortgage branch to reality liquidity. The bailout arrived just as ResCap revealed that it needed to raise $2b in cash by the end of June to meet its obligations, after losing $859m in the first quarter of this year. ResCap has refinanced its unsecured debt, renewed bank credit lines, and exchanged nearly $10m in bonds for higher-interest, longer-term debt. GMAC shareholders GM and Cerberus jointly provided $750m guarantee as part of a $3.75b line of credit extended from GMAC to ResCap, and have thereby exposed themselves to the first loss, should ResCap default. Interestingly, the bailout came in a week that saw rampant speculation (since denied) of a Cerberus sale of portions of GMAC and Chrysler. Far from punting, Cerberus is actually buying-up hundreds of millions of dollars worth of GMAC's resort funding division and ResCap's model home assets, since market conditions are slowing asset sales. "The fact that ResCap's owners – both GMAC and Cerberus – remain willing to pony-up cash in order to keep the mortgage subsidiary afloat, strongly suggests that they still see something there that's worth saving," KDP analyst Thomas Ferguson tells Reuters. Avoiding bankruptcy perhaps? Whatever it is, GM and Cerberus better hope it pays off, and soon.
5 Comments on “GM, Cerberus Re-Up in ResCap...”
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At some point, the economy is going to strengthen, and with Cerberus buying up all this stuff at relatively low prices, when the market goes back up, Cerberus is going to make a killing.
Assuming, of course, that the market doesn’t go too much farther down and take Cerberus and it’s assets with it.
1928: Borrow, borrow, borrow and buy! buy! buy!
1929: See? Stock market’s up! Borrow more, buy more! All’s well in the world!
November 1929: It’s only a temporary down-turn.
1930: It’s only a temporary down-turn! Honest, it is!
1931: Brother, can you spare a dime?
If it doesn’t work out, us taxpayers can pick up the tab or the Feds can print more money.
Airhen
what do you mean by or? don’t you mean and?
Cerberus
From Wikipedia, the free encyclopedia
•In Greek mythology, Cerberus or Kerberos (Greek Κέρβερος, Kérberos or Sürbürǔs, the daemon or ker of Erebos) was the hound of Hades, a monstrous three-headed dog[1] with a snake for a tail and snakes down his back like a mane, whose analogs in other cultures are hellhounds.