Did GMAC Become a Bank or Not? GM Ain't Sayin'
In our coverage of lender GMAC’s struggle to become a bank (i.e. suckle on Uncle Sugar to avoid bankruptcy), we pretty much assumed it was a done deal. The Fed’s decision to grant GMAC bank status if/when they completed a mega-debt-for-equity swap seemed like the come-on reluctant investors needed to take their chances with the U.S. taxpayer, rather than a bankruptcy judge. The dealine for the d-for-e swap expired last night at 11:59. If GMAC made it, it’s just another step down the road to recovery, or nationalization, depending on your perspective. If they didn’t, all HELL will break loose. GM simply can’t survive without GMAC covering its dealers’ floorplan costs (loans for inventory). If GMAC goes down, thousands of GM dealers go belly-up. While that’s exactly what GM needs, they don’t need it all at once. The market would be flooded with hundreds of thousands of units of unsold inventory, supplier confidence would disappear, etc. So which way did it go, then? “We have not yet issued final results,” GM spinmeister Gina Proia told the AP. “But intend to in the near term. I have no further comment on the exchange until then.” Someone somewhere is holding their breath.
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oldguy: That was old news - they still had to get the debt/equity swap by Friday and that is what is unanswered. JH above is right - no news is not good news; either they didn't make the minimum exchange requirements or Cerberus isn't taking the deal that would cut their stake in GMAC from 51% to just over 14%. Doing so would obviously muck up their grand plans - no doubt they are trying to extract something from GM over this as its GM's blood in the water.
I agree. I'm putting my money on Cerberus throwing a wrench in the works to in order to get better terms. They know that the operations side (ChryCo) is shot, so all that's left to profit from is GMAC and ChryCo Finance. Love them or hate them, they know the dark arts of finance better then anyone and now that the Gov't has shown their hand (Please take our money) they're in it, to win it.
Folks: it all depends on what the offer said. If it was delivery of the securities and other papers to a certain person at a certain place by the end of Friday, that would be one thing. On the other hand, if the stuff had to be mailed by Friday (or Fed Ex-ed or whatever), that would be a different story -- one that might take a few days to untangle. Another issue is that a lot of European banks and businesses were closed on Friday. I don't know what provisions governed those institutions and their customers. My suggestion is to wait until the Fat Lady hits high C.
When the "TARP" was authorized the gov't said they were going to buy up some of the "toxic debt" said to be clogging the credit system. But, they never did it! Instead they spent the money buying preferred stock in banks with no say over how the funds are to be used. Might it not have been easier for the Fed or the Treasury to go on the open market and buy up that GMAC debt at the 10-20 cents on the dollar it is going for instead of getting GMAC to do a make believe recapitalization where the debt holders magically become equity investors? The TARP authorization gave them the authority to do just that. "Madness takes its toll."