Psychoblues
12-29-2008, 08:57 PM
I wonder when we'll start having to finance our furniture from the federal government?
December 29, 2008
WASHINGTON
The U.S. Treasury will inject up to $6 billion into GMAC as part of a plan to shore up the finances of GM’s lending arm and the U.S. auto industry, the Bush administration said today.
Under the plan, the Treasury will buy $5 billion in preferred GMAC shares, paying an 8% annual dividend. It also will lend up to $1 billion to General Motors Corp. so that it too can buy additional equity in GMAC, which the Treasury could take on demand.
The Treasury said the money for the injection would come from the $700 billion financial industry bailout, and that GMAC would have to meet restrictions on executive pay as part of the deal.
The troubled lending arm won a key lifeline last week when the Federal Reserve said it could become a bank holding company, granting it access to the $700-billion financial industry bailout and other aid.
GMAC had pressured bondholders to convert 75% of their debt into equity, part of a plan to raise $30 billion in capital and stave off a possible bankruptcy of its own.
As of this evening, however, GMAC still had not announced the results from that debt exchange, which ended at midnight Friday.
“We are processing the results, and we will disclose the final tabulation here sometime soon,” said GMAC spokeswoman Toni Simonetti.
In awarding the bank status, the Fed said it had considered GMAC’s “successful efforts to raise additional capital and that, as a result, GMAC will be well capitalized on completion.”
The ruling required GM to sell most of its 49% stake in GMAC, and forced Cerberus Capital, the private equity firm that bought 51% of GMAC from GM, to turn much of its voting stake over to its investors.
While the outcome of the bond swap alone won’t change the Fed’s decision, the Fed could reconsider if GMAC were to fall well short of its goal for fresh capital.
Simonetti said the Fed’s requirements “relates to your capital adequacy and not necessarily the means by which you raise it. We’re still in the process of raising the required levels of capital.”
The Treasury’s new loan to GM came as it and Chrysler scoured the fine details of the federal government’s $17.4 billion rescue plan Monday, pushing the payment of the first $8 billion slice back to today at the earliest.
Officials on both sides said the delays involved translating the 29 pages of conditions unveiled by President George W. Bush 10 days ago into legal terms, such as the government’s requirements for limits on executive pay and collateral to back the loans.
GM and Chrysler originally were slated to receive $4 billion each on Monday, when their individual deals were scheduled to close, and both have warned they could run short of cash in a matter of days without federal help.
The companies face the end of their financial years for bookkeeping practices Thursday.
“We’re making good progress finalizing the automaker loans and are committed to closing them on a timeline that will meet their individual near-term funding needs,” said U.S. Treasury spokeswoman Brookly McLaughlin.
GM spokesman Greg Martin said the company “continues to work with the federal government on the final stages of the loan agreement and we remain confident a timely signing of the federal loan agreement will occur prior to our needs.”
The automakers must commit to winning extensive sacrifices from creditors and unions by March 31 as part of the rescue, with a detailed survival plan due to the U.S. Treasury by Feb. 17. Those plans must include cutting debt by two-thirds and requiring the UAW to accept wages and work rules that match those of foreign automakers’ U.S. plants by the end of 2009.
Several analysts question whether the plan will be enough to forestall bankruptcy, especially for Chrysler, which can receive only the $4 billion while GM could get $13.4 billion. Should the automakers fail to prove a plan for viability, the government could call the loans back immediately.
The UAW has said it was not part of the talks for the rescue, which also requires it to take half of the payments it is due for a retiree health-care trust in stock.
UAW President Ron Gettelfinger has vowed to press Congress and the upcoming Obama administration to change the deal once President-elect Barack Obama takes office Jan. 20, and the industry likely will ask for more of the $34 billion it had sought earlier this year.
More: http://www.freep.com/article/20081229/BUSINESS01/81229058
:beer::cheers2::beer:
Psychoblues
December 29, 2008
WASHINGTON
The U.S. Treasury will inject up to $6 billion into GMAC as part of a plan to shore up the finances of GM’s lending arm and the U.S. auto industry, the Bush administration said today.
Under the plan, the Treasury will buy $5 billion in preferred GMAC shares, paying an 8% annual dividend. It also will lend up to $1 billion to General Motors Corp. so that it too can buy additional equity in GMAC, which the Treasury could take on demand.
The Treasury said the money for the injection would come from the $700 billion financial industry bailout, and that GMAC would have to meet restrictions on executive pay as part of the deal.
The troubled lending arm won a key lifeline last week when the Federal Reserve said it could become a bank holding company, granting it access to the $700-billion financial industry bailout and other aid.
GMAC had pressured bondholders to convert 75% of their debt into equity, part of a plan to raise $30 billion in capital and stave off a possible bankruptcy of its own.
As of this evening, however, GMAC still had not announced the results from that debt exchange, which ended at midnight Friday.
“We are processing the results, and we will disclose the final tabulation here sometime soon,” said GMAC spokeswoman Toni Simonetti.
In awarding the bank status, the Fed said it had considered GMAC’s “successful efforts to raise additional capital and that, as a result, GMAC will be well capitalized on completion.”
The ruling required GM to sell most of its 49% stake in GMAC, and forced Cerberus Capital, the private equity firm that bought 51% of GMAC from GM, to turn much of its voting stake over to its investors.
While the outcome of the bond swap alone won’t change the Fed’s decision, the Fed could reconsider if GMAC were to fall well short of its goal for fresh capital.
Simonetti said the Fed’s requirements “relates to your capital adequacy and not necessarily the means by which you raise it. We’re still in the process of raising the required levels of capital.”
The Treasury’s new loan to GM came as it and Chrysler scoured the fine details of the federal government’s $17.4 billion rescue plan Monday, pushing the payment of the first $8 billion slice back to today at the earliest.
Officials on both sides said the delays involved translating the 29 pages of conditions unveiled by President George W. Bush 10 days ago into legal terms, such as the government’s requirements for limits on executive pay and collateral to back the loans.
GM and Chrysler originally were slated to receive $4 billion each on Monday, when their individual deals were scheduled to close, and both have warned they could run short of cash in a matter of days without federal help.
The companies face the end of their financial years for bookkeeping practices Thursday.
“We’re making good progress finalizing the automaker loans and are committed to closing them on a timeline that will meet their individual near-term funding needs,” said U.S. Treasury spokeswoman Brookly McLaughlin.
GM spokesman Greg Martin said the company “continues to work with the federal government on the final stages of the loan agreement and we remain confident a timely signing of the federal loan agreement will occur prior to our needs.”
The automakers must commit to winning extensive sacrifices from creditors and unions by March 31 as part of the rescue, with a detailed survival plan due to the U.S. Treasury by Feb. 17. Those plans must include cutting debt by two-thirds and requiring the UAW to accept wages and work rules that match those of foreign automakers’ U.S. plants by the end of 2009.
Several analysts question whether the plan will be enough to forestall bankruptcy, especially for Chrysler, which can receive only the $4 billion while GM could get $13.4 billion. Should the automakers fail to prove a plan for viability, the government could call the loans back immediately.
The UAW has said it was not part of the talks for the rescue, which also requires it to take half of the payments it is due for a retiree health-care trust in stock.
UAW President Ron Gettelfinger has vowed to press Congress and the upcoming Obama administration to change the deal once President-elect Barack Obama takes office Jan. 20, and the industry likely will ask for more of the $34 billion it had sought earlier this year.
More: http://www.freep.com/article/20081229/BUSINESS01/81229058
:beer::cheers2::beer:
Psychoblues