GMAC May Back Off Bank Application, Die Alone

In an SEC filing today, GMAC Financial Services warns that it may back away from its bank holding company status application, due to its inability to refinance some $38b in debt. That bank holding company status would make GMAC eligible for TARP funds, but without a federal rescue many see GMAC heading for bankruptcy court says Automotive News [sub]. Including GMAC. The Cerberus-owned finance firm warned that if it doesn’t receive holding company status by December 31, “it would have a near-term material adverse effect on GMAC’s business, results of operations and financial position.” Meaning it will be forced to sell of more assets (with no buyers lining up) and miss 2009 debt payments. To meet the Fed’s requirement, GMAC said it needs about 75 percent participation in its debt-swap offer. So far, participation is just over 20 percent. The good news? If you’ve got $20b or so rattling around and you want in, GMAC has extended its debt-swap deadline until December 12. Deep Throat breaks down the bad news thusly: “GM would have to write down its investment in GMAC likely to zero. The big problem is the floorplan issue for dealers. There are few replacement lenders right now, and those that will step up will offer harsher terms, curtailments, etc. That means less ability for GM to stockpile cars at dealer lots. OTOH, it’s possible that other captives, like Toyota’s finance arm, could seize an opportunity to play… especially if a GM dealer is also a Toyota dealer. But again, terms will be critical, and depends how much exposure these guys want and how much capacity they have. What’s interesting is that the bonds trade high with only 10-15% discounts from par. This is due to the recovery from finance assets being much better than from manufacturing assets.”