(Reuters) – GMAC LLC may have applied for up to $6 billion in funds from the government’s financial bailout program, and could potentially sell $17.5 billion in government-backed debt to shore up its capital position, CreditSights said.
The finance company, owned by Cerberus Capital Management CBS.UL and General Motors Corp, on Wednesday won approval to become a bank holding company, giving it access to the government lending program.
GMAC has said without bank holding company status, it would likely have to sell assets and take other extraordinary measures to make good on its obligations. The company, which makes auto loans for GM’s customers, has lost $7.9 billion over the last five quarters.
“While GMAC has not quantified its capital injection request from Troubled Assets Relief Program (TARP), we estimate the company could have applied for up to about $6.3 billion,” CreditSights analysts Richard Hofmann and Adam Steer said in a report late on Thursday.
This is based on capital injections being limited to 3 percent of risk-weighed assets, the analysts said.
GMAC may also be eligible to sell up to $17.5 billion in bonds backed by the Federal Deposit Insurance Corp if approved to sell debt under the government’s Temporary Liquidity Guarantee Program (TLGP), CreditSights said.
Issuance under the TLGP is limited to 125 percent of outstanding, unsecured debt that a company issued before Sept 30, 2008, and that matures before June 30, 2009, the analysts said.
GMAC’s bonds surged on the news of the approval of bank holding company status. The company’s 5.625 percent bond due 2009 jumped 27 cents to 94 cents on the dollar, according to MarketAxess.
The cost to insure GMAC’s debt with credit default swaps also plunged to around 24 percent the sum insured, or $2.4 million to insure $10 million for five years, plus annual payments of 5 percent. The swaps had traded at around 47 percent before the news. (Reporting by Karen Brettell; Editing by Neil Stempleman)