GMAC intends to exchange ResCap bonds acquired in offers for equity interests in IB Finance

By Jennifer Chiou

New York, Dec. 19 - GMAC Financial Services announced that in connection with its private exchange offers and cash tender offers for certain of its and its subsidiaries' and Residential Capital, LLC's outstanding notes, GMAC intends to transfer the acquired ResCap notes in exchange for all or a majority of the non-voting common equity of IB Finance Holding Co. LLC held by ResCap.

The acquired ResCap notes are to be equal to at least 25% of ResCap's outstanding debt, according to a news release, which added that IB Finance is the parent entity for GMAC Bank.

Immediately following the IB Finance transaction, ResCap would cancel its old notes acquired from GMAC Financial.

On Dec. 18, GMAC LLC said it received tenders for $16.9 billion, or 58%, of GMAC notes and $3.5 billion, or 38%, of Residential Capital, LLC notes in its private exchange offers and tender offers as of the end of the day on Dec. 17.

GMAC already said it had been informed by numerous securities custodians that additional instructions to tender notes remained in the process of being submitted, and it estimated that about $16.6 billion of the outstanding GMAC notes and about $3.5 billion of the ResCap notes had been tendered.

As already noted, GMAC needs to achieve at least $30 billion of total regulatory capital to meet the Federal Reserve's requirements for it to become a bank holding company, and it needs roughly 75% participation in the offers in order to meet this condition.

The notes tendered through Dec. 17 represent about 54% of the notes eligible for the offers.

Previously, the company said it plans to withdraw its application to become a bank holding company if it does not receive the needed amount of notes and that if it is unable to successfully convert to a bank holding company and complete the offers by Dec. 31, it would have a near-term material adverse effect on GMAC's business, results of operations and financial position.

As previously reported, GMAC amended the offer on Dec. 15 after agreeing in principle with representatives of a group of noteholders.

The dividend on the preferred stock to be issued in the exchange offers was increased to 9% from 5%. The dividend will be reduced to 7% if GMAC raises at least $2 billion of new tier 1 capital, $750 million of which will be contributed by existing shareholders.

The offers were also amended to add some covenants relating to the new guaranteed notes, including restrictions on liens, subsidiary guarantees and asset sales.

Before the amendments, $6.3 billion, or 22%, of the GMAC notes and $2.0 billion, or 21%, of the ResCap notes had been tendered.

The exchange offers and tender offers for 33 series of outstanding GMAC and ResCap debt securities totaling $38 billion began on Nov. 20. The early delivery time was 5 p.m. ET on Dec. 19, and the offer will expire at 11:59 p.m. ET on Dec. 26.

The early delivery date was originally scheduled for Dec. 4 and has been extended five times. The original offer expiration was Dec. 18 and has been extended once.

GMAC is offering to purchase and/or exchange any and all of the notes series for, at the election of each eligible holder, either (a) new securities, consisting of (i) a combination of newly issued senior guaranteed notes for the old GMAC notes maturing prior to 2031 or a combination of new guaranteed notes and newly issued 8% subordinated notes due 2018 for old GMAC notes due 2031, and (ii) newly issued 9% perpetual senior preferred stock with a liquidation preference of $1,000 per share of a wholly owned subsidiary of GMAC; or (b) cash.

Global Bondholder Services Corp. (866 794-2200) is the information agent.

GMAC is a Detroit-based diversified financial services company.

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