Confirming reports earlier today in The Wall Street Journal and the Financial Times, auto- and real estate financier GMAC LLC this afternoon confirmed the government has given the company $3.8 billion in additional financing.
The investment will be maid by the U.S. Treasury in the form of $2.54 billion in trust preferred securities in GMAC, with an 8% coupon, and $1.25 billion of 9% coupon mandatorily convertible preferred stock.
As a result of the transaction, the Government’s stake in GMAC rises to 56.3% from 35.4% before the deal. Other holders such as hedge fund Cerberus, have seen their stakes diluted, down to 14.9% in Cerberus’s case.
The cash infusion will help strengthen GMAC’s capital base, it said, minimize further adverse effects of ResCap, its residential finance unit, and also position the company to “explore strategic alternatives” for ResCap. GMAC used funds to inject $2.7 billion into ResCap. GMAC will take a write-down of $3.8 billion, in large part due to $2 billion of mortgage write-downs at ResCap.
Warren Buffett, are you listening?
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