View Full Version : GMAC Gets Bailout

01-02-2009, 10:07 AM

Friday January 2, 8:29 am ET
By Tom Krisher, AP Auto Writer
Government to get 5 million preferred GMAC shares in exchange for $5 billion in bailout cash

DETROIT (AP) -- The federal government will get 5 million preferred shares of GMAC LLC paying 8 percent interest in exchange for its $5 billion capital injection to help the troubled lender avoid bankruptcy.

GMAC disclosed the terms of the deal in a filing Friday with the U.S. Securities and Exchange Commission. GMAC is the financial arm of General Motors Corp. and is responsible for making car loans and financing dealer inventories.

The government also exercised a 10-year warrant to buy 250,000 more GMAC preferred shares for a penny each, according to the filing.

GMAC said if the U.S. Treasury doesn't get interest payments on its preferred shares for six straight quarters, or more than six nonconsecutive quarters, it will get two seats on an expanded GMAC management board.

"These two managers will serve until all accrued and unpaid distributions on the Series D-1 Preferred Interests have been paid in full," GMAC said in the filing.

GMAC is 49 percent owned by GM and 51 percent owned by private equity firm Cerberus Capital Management LP.

In the filing, GMAC also disclosed that it will give up its exclusive agreement to provide financing incentive programs for GM vehicle sales, and that GMAC will no longer be obligated to provide financing for GM leases.

GMAC had paid GM an annual exclusivity fee and had been required to meet targets for leases and loans, the filing said. The exclusivity deal was effective through November 2016, according to the filing.