UPDATE 2-GMAC unit to meet with banks on Friday - source
(Adds detail about GM, background about ResCap, GMAC comment)
By Dan Wilchins
NEW YORK, May 1 (Reuters) - GMAC's mortgage unit is meeting with banks on Friday to restructure its credit lines, and is expected to propose new borrowing terms to its bondholders on Friday as well, a person familiar with the matter said.
GMAC's Residential Capital LLC is working to restructure its debt obligations as the mortgage market deteriorates and its losses mount. ResCap posted an $859 million first-quarter loss on Tuesday, its sixth-straight quarterly loss, as its international operations deteriorated.
On Friday, ResCap will meet with banks in New York to discuss restructuring credit facilities, the person said. ResCap will also propose that bondholders agree to longer-term maturities on their debt, the person said.
ResCap still has $17 billion of debt due in 2008, GMAC said on Tuesday. The company had cash and equivalents of $4.2 billion as of the end of March.
A spokeswoman for GMAC declined to comment. She added that GMAC said on Tuesday it was in active discussions with its banks regarding strategies to ensure adequate access to funding.
ResCap is one of scores of mortgage lenders suffering as the U.S. housing market bubble deflates.
Losses at GMAC are also hitting former parent General Motors Corp GM.N, which still owns a 49 percent stake after selling the rest in 2006 to private equity firm Cerberus Capital Management [CBS.UL].
GM said on Wednesday it took a $1.45 billion first-quarter charge for its remaining investment in GMAC.
Earlier this month, GMAC bought back $1.2 billion of ResCap debt at about 50 cents on the dollar, and gave it to ResCap, which retired the debt. In exchange, GMAC received preferred shares from the unit, in a deal meant to help shore up the mortgage lender's capital base. GMAC also agreed to provide ResCap with a $750 million revolving bank line.
ResCap is the largest independent U.S. mortgage lender other than Countrywide Financial Corp CFC.N, and the eighth-largest U.S. mortgage lender overall, according to newsletter Inside Mortgage Finance.
In the first quarter, ResCap cut costs and reduced risk in its U.S. business, but any benefits from those moves were offset by deterioration in its international operations, the company said. (Editing by Braden Reddall)
