GM shares up, GMAC may be eyeing $6 billion loans

By Soyoung Kim and Karen Brettell

DETROIT/NEW YORK (Reuters) - Shares of General Motors Corp jumped on Friday after its auto finance affiliate GMAC won access to government lending programs, while analysts estimated GMAC might be seeking loans of more than $6 billion.

The Federal Reserve approved GMAC's status as a bank on Wednesday, giving the troubled finance company access to the Treasury-run financial bailout package, which may help GMAC avoid bankruptcy and continue financing of dealer and consumer loans for GM vehicles.

The news came less than a week after the U.S. government agreed to bail out GM and Chrysler LLC with $17.4 billion of emergency loans to provide liquidity and stave off collapse and massive job losses.

Analysts said the approval of GMAC as a bank further reduced the risk of bankruptcy for the No.1 U.S. automaker.

Underscoring the financial strains facing the U.S. auto industry, GM filed a lawsuit on Wednesday against a bankrupt auto-parts supplier, saying it is holding necessary equipment "hostage" and that could potentially interrupt the launch of its new Chevrolet Camaro car.

"It's significant in terms of GM's ability to move cars," said Erich Merkle, an analyst at Crowe Horwath.

"Things are still pretty ugly out there (in terms of sales) but in terms of GM possibly filing for bankruptcy, in my mind that's not going to happen. The reason I'm saying this is what they (the government) are doing with GMAC right now."

Shares of GM were up 13.54 percent, or 44 cents, at $3.69 on the New York Stock Exchange.

Bonds of GMAC LLC also rose, while the cost to insure GMAC's debt with credit default swaps plunged.

CreditSights said GMAC may have applied for up to $6 billion in funds from the government's $700 billion financial bailout program, and could potentially sell $17.5 billion in government-backed debt to shore up its capital position.

"While GMAC has not quantified its capital injection request from Troubled Assets Relief Program (TARP), we estimate the company could have applied for up to about $6.3 billion," CreditSights analysts Richard Hofmann and Adam Steer said in a report late on Thursday.

The analysts based their projections based on capital injections being limited to 3 percent of risk-weighed assets.

The bank status came before a debt swap deadline of 11:59 p.m. Friday. GMAC, owned by private equity firm Cerberus and GM, is looking to swap $38 billion of outstanding debt for a smaller amount of new debt, as well as preferred shares and cash, to reduce its debt load and raise capital.

"This opens the door to invest in the senior and subordinated debt," which are trading "at very attractive yields," said Andrew Brenner, an analyst at MF Global Inc in New York.

GMAC's 5.625 percent notes due in 2009 climbed to 94 cents, yielding 23 percent, versus about 73 cents on Monday, its last significant trade, when the note yielded almost 104 percent, according to MarketAxess data.