GMAC Statement on Bankruptcy Court Approval of Sale of Assets by GM

DETROIT, July 6, 2009; GMAC Financial Services has been notified that the U.S. Bankruptcy Court has approved the sale of assets of General Motors Corporation to an entity sponsored by the U.S. Treasury. In conjunction with the closing of the sale, the contracts GM has with GMAC will be transferred to the new GM entity. GMAC is pleased to conduct its business operations with the new GM entity and to be part of the solution to stabilize and strengthen the U.S. auto industry.

GMAC is a leader in automotive financing and continues to offer these products and services to both GM and Chrysler dealers and customers.

GMAC is a bank holding company with 15 million customers worldwide. As a global, independent financial services institution, GMAC's diversified business operations include automotive finance, mortgage operations, insurance, commercial finance and online banking.

GMAC majority owned by those great Americans that took Chrysler to bankruptcy.

On Nov. 30, 2006, GM sold a 51 percent controlling interest in GMAC to a consortium of investors led by Cerberus Capital Management, L.P., a private investment firm, and including Citigroup Inc., Aozora Bank Ltd. and a subsidiary of The PNC Financial Services Group, Inc. On Dec. 24, 2008, GMAC was approved as a bank holding company under the Bank Holding Company Act.

GMAC is a global finance company operating in and servicing North America, South America, Europe and Asia-Pacific. GMAC specializes in automotive finance, real estate finance, insurance, commercial finance and online banking.

Wikipedia GMAC

Cerberus acquired 51 percent of GMAC, General Motors' finance arm, in 2006 for $7.4 billion. [10] It appointed Merkin as nonexecutive Chairman.[11]

As of October 15, 2008, GMAC had $173 billion of debt against $140 billion of income-producing assets (loans and leases), some which are almost worthless, in addition to GMAC Bank’s $17 billion in deposits (a liability). Even if GMAC liquidated the loans and leases, it could not pay back all of its debt.[12]

On December 10, 2008, GMAC said, "GMAC LLC, the auto and home lender seeking federal aid, hasn’t obtained enough capital to become a bank holding company and may abandon the effort, casting new doubt on the firm’s ability to survive. A $38 billion debt exchange by GMAC and its Residential Capital LLC mortgage unit to reduce the company's outstanding debt and raise capital hasn’t attracted enough participation." This was due in part because Cerberus had raised the credit requirements for car loans so high, virtually eliminating leasing, that they have been responsible for a sizable chunk of lost sales at GM due to customers inability to secure financing, in order to pressure GM into selling or trading their remaining stake in GMAC.[13] GM stands to write-off over a billion dollars in lost residuals – which they paid up front to GMAC. GMAC's exposure to the gap in residual values is around $3.5 billion.[14]

In December 2008, Cerberus subsequently informed GMAC’s bondholders that the financial services company may have to file for bankruptcy if a bond-exchange plan is not approved. The company had previously said it may fail in its quest to become a bank holding company because it lacks adequate capital.[15]

In January 2009, Merkin resigned from his chairmanship as a condition by the U.S. government.[16]

Five days earlier, the Federal Reserve granted GMAC bank holding company status, so it could get access to the bailout money.[17] On December 29, 2008, the U.S. Treasury gave GMAC $5 billion from its $700 billion Troubled Asset Relief Program (TARP).

Cerberus's investments in Chrysler and GMAC totaled about 7 percent of its assets under management.[5]

At the end of May, 2009, Cerberus scaled back their ownership as a condition of the lender becoming a bank-holding company, when the bulk of GM's existing ownership stake in GMAC was placed into a trust, overseen by a trustee appointed by the Treasury, to be gradually dispersed. Cerberus distributed the majority of its stake in GMAC to its investors.[18] The FDIC gave GMAC access to the Temporary Liquidity Guarantee Program that allows companies to borrow money at lower interest rates. The initiative was created in October, 2008 to help banks borrow money by promising to repay investors if the banks defaulted. The U. S. Government also waived a rule that would restrict the amount of loans that GMAC could make to Chrysler's customers and dealers because both firms are owned in part by Cerberus Capital Management.