NEW YORK (Reuters) – GMAC LLC, the money-losing auto finance and mortgage provider, on Thursday confirmed it was seeking to become a bank holding company, and said it plans to overhaul and slash its debt load, barely four months after completing a $60 billion refinancing package.
The Detroit-based lender said it was in talks with federal regulators about becoming a bank holding company, which would make it easier to participate in U.S. Treasury Secretary Henry Paulson’s $250 billion bank recapitalization plan.
On Tuesday, GMAC said it won the right to take part in a U.S. Federal Reserve commercial paper program designed to help unlock credit markets.
GMAC has lost $7.2 billion in the seven quarters ending June 30, hurt by soaring credit losses at its Residential Capital LLC mortgage unit, and more recently by writedowns of leases on sport-utility vehicles that drivers no longer want.
Its credit ratings have fallen deep into junk status, and many analysts have questioned its survival prospects.
GMAC’s fate is intertwined with a possible merger of GM and Chrysler LLC, also majority-owned by Cerberus.
GM and Cerberus have resolved major issues, but the final form of any merger depends on financing and government support available, people familiar with the talks said on Wednesday.
GMAC said it may raise significant new capital to help it become a bank holding company. To that end, it plans to soon announce details of a private offer to exchange a “significant amount” of its existing debt for a lower amount of new debt.
“The benefits of this type of restructuring would allow us to put additional capital and liquidity resources immediately to work in financing consumers and automotive dealers,” GMAC Chief Executive Alvaro de Molina said in a statement.
GM shares slipped 5 cents to $6.71 in morning trading.
(Reporting by Jonathan Stempel, editing by Maureen Bavdek)