Investor Reneges; GMAC Headed for C11. GM Next?

The Wall Street Journal (WSJ) reports that General Motor’s former captive finance unit and current chest-strapped TNT device looks set to miss its deadline for a debt-for-equity swap. GMAC needs to get the deal done to transform itself into a bank and score federal funding under the Troubled Asset Relief Plan (TARP). “GMAC needs to show $30 billion of capital in order to become a bank holding company regulated by the Federal Reserve… As of Wednesday, GMAC had received 58% of existing, eligible GMAC debt securities and 38% of outstanding debt securities of ResCap (as the mortgage unit is also known) — little changed from late Tuesday. Around 75% of the selected securities must be tendered for the proposed debt restructuring to succeed in raising capital that would go toward satisfying GMAC’s conditions to become a bank holding company.” Those plans took a major hit today…

“ Pacific Investment Management Co., a large bondholder of GMAC LLC debt, is unlikely to participate in the lender’s massive debt restructuring offer, said a person familiar with the matter.”

A WSJ source says if GMAC fails to reach its goals by close of play tomorrow, it might put its ailing mortgage unit, Residential Capital LLC, into bankruptcy. The move would be an attempt to cauterize the wound, so that GMAC could continue its auto financing and other operations. If that fails, and GMAC as a whole goes down, GM is through. Thousands of GM dealers would lose inventory financing and go belly-up, flooding the market with hundreds of thousands of unsellable vehicles.

This on the eve of the President’s decision on GM and Chrysler’s “managed bankruptcy” or similar. It’s going to be a busy not to say historic day…