A Hound From Hell or A Cipher?
A group led by Cerberus bought a 51% stake in GMAC, the auto and home lender, in 2006.
GM later injected $1 billion into GMAC to make up for previous writedowns of mortgage assets at ResCap.
GMAC in the third quarter of 2007 infused $1 billion more into ResCap.
GMAC lost $2.3 billion last year and credit analysts have said continued support for its ResCap unit may hurt the financial health of the parent company.
Residential Capital LLC lost almost $4.4 billion last year because of mortgage-related write-downs.
On April 4th GMAC bought $1.2 billion of debt issued by its Residential Capital LLC mortgage unit.
GMAC bought the $1.2 billion of ResCap debt trading at about half face value and then retired it.
GMAC received preferred shares of ResCap that can be exchanged for interests in GMAC Bank. It gets better...
On April 8th, GMAC, transferred control to an investor group led by Cerberus Capital Management LP.
The plan gives all voting rights to the group controlled by Cerberus, which shares ownership of GMAC with General Motors Corp
Last week, GMAC arranged a six month, $750 million revolving credit facility for ResCap until longer-term financing could be arranged.
Mortgage lender ResCap has already tapped much of the new $750 million line of credit.
Two subsidiaries of ResCap borrowed $468 million or 62% from the facility on April 18, GMAC said in a regulatory filing.
In another SEC filing, GMAC said Thursday it has been looking for ways to help ResCap refinance its debt and find new lenders. It gets better...
Wednesday, Aozora Bank., a Japanese bank that invested in the GMAC deal, reported Q1 profits declined 94%...
and disclosed that it booked a roughly $130 million loss on its $500 million equity investment.
The punchline... at 45%, Cerberus is Aozora's largest shareholder.
In a February letter to his investors, Cerberus boss Stephen Feinberg admitted to problems at GMAC.
"If the credit markets continue to decline and we find ourselves in a prolonged environment of capital market shutdown, GMAC could run into substantial difficulty.
There is risk that despite the huge declines that are already part of the current credit environment in the capital markets, things could get a lot worse."
It gets better... According to the FDIC, last year, GMAC Bank (the source of 30% of ResCap's 2007 funding)
lent $17 billion to the residential real-estate sector and retained just $3.3 billion in capital.
About $3 billion of those loans were backed by junior liens, while $2 billion went to home-equity loans. Since issuance, this debt has sunk substantially in value.
When Cerberus bought GMAC Bank, which is clasified as an ILC, the FDIC had imposed a moratorium on the approval of banks owned by nonfinancial companies.
ILC's industrial loan corporations are FDIC-supervised lenders that offer a way for commercial firms to own banks without being regulated by a federal banking agency.
Despite the moratorium, the FDIC granted Cerberus application for a waiver because of "the unique circumstances" of GM's restructuring.
In exchange, GMAC and Cerberus agreed to satisfy one of the following conditions by November 2008:
sell GMAC Bank; the bank would cease using FDIC insurance; or register as a bank holding company.
Selling GMAC bank at this point is problematic, which means, Cerberus would have to get an FDIC waiver...
or Congress enacts legislation allowing GMAC and other nonbank businesses to own ILCs, such as GMAC Bank.
Hattip to Bloomberg & WSJ
GM later injected $1 billion into GMAC to make up for previous writedowns of mortgage assets at ResCap.
GMAC in the third quarter of 2007 infused $1 billion more into ResCap.
GMAC lost $2.3 billion last year and credit analysts have said continued support for its ResCap unit may hurt the financial health of the parent company.
Residential Capital LLC lost almost $4.4 billion last year because of mortgage-related write-downs.
On April 4th GMAC bought $1.2 billion of debt issued by its Residential Capital LLC mortgage unit.
GMAC bought the $1.2 billion of ResCap debt trading at about half face value and then retired it.
GMAC received preferred shares of ResCap that can be exchanged for interests in GMAC Bank. It gets better...
On April 8th, GMAC, transferred control to an investor group led by Cerberus Capital Management LP.
The plan gives all voting rights to the group controlled by Cerberus, which shares ownership of GMAC with General Motors Corp
Last week, GMAC arranged a six month, $750 million revolving credit facility for ResCap until longer-term financing could be arranged.
Mortgage lender ResCap has already tapped much of the new $750 million line of credit.
Two subsidiaries of ResCap borrowed $468 million or 62% from the facility on April 18, GMAC said in a regulatory filing.
In another SEC filing, GMAC said Thursday it has been looking for ways to help ResCap refinance its debt and find new lenders. It gets better...
Wednesday, Aozora Bank., a Japanese bank that invested in the GMAC deal, reported Q1 profits declined 94%...
and disclosed that it booked a roughly $130 million loss on its $500 million equity investment.
The punchline... at 45%, Cerberus is Aozora's largest shareholder.
In a February letter to his investors, Cerberus boss Stephen Feinberg admitted to problems at GMAC.
"If the credit markets continue to decline and we find ourselves in a prolonged environment of capital market shutdown, GMAC could run into substantial difficulty.
There is risk that despite the huge declines that are already part of the current credit environment in the capital markets, things could get a lot worse."
It gets better... According to the FDIC, last year, GMAC Bank (the source of 30% of ResCap's 2007 funding)
lent $17 billion to the residential real-estate sector and retained just $3.3 billion in capital.
About $3 billion of those loans were backed by junior liens, while $2 billion went to home-equity loans. Since issuance, this debt has sunk substantially in value.
When Cerberus bought GMAC Bank, which is clasified as an ILC, the FDIC had imposed a moratorium on the approval of banks owned by nonfinancial companies.
ILC's industrial loan corporations are FDIC-supervised lenders that offer a way for commercial firms to own banks without being regulated by a federal banking agency.
Despite the moratorium, the FDIC granted Cerberus application for a waiver because of "the unique circumstances" of GM's restructuring.
In exchange, GMAC and Cerberus agreed to satisfy one of the following conditions by November 2008:
sell GMAC Bank; the bank would cease using FDIC insurance; or register as a bank holding company.
Selling GMAC bank at this point is problematic, which means, Cerberus would have to get an FDIC waiver...
or Congress enacts legislation allowing GMAC and other nonbank businesses to own ILCs, such as GMAC Bank.
Hattip to Bloomberg & WSJ
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