September 22, 2010 / 11:48 PM / in 7 years

Watchdog to review GM buy of AmeriCredit Corp

WASHINGTON (Reuters) - A government bailout watchdog will review the General Motors Co (GM.N) GM.UL $3.5 billion all-cash purchase of auto finance company AmeriCredit Corp ACF.N, a deal financed with federal bailout money.

Neil Barofsky, the special inspector general for the Treasury Department’s corporate bailout program, said in a letter to Sen Charles Grassley obtained by Reuters on Wednesday that auditors for the Troubled Asset Relief Program also want to know what role Treasury officials played in “reviewing, approving or otherwise participating in the AmeriCredit decision.”

The audit was triggered by a request from Grassley for Barofsky to look into that deal, which carried a 25 percent premium over the AmeriCredit share price at the time. Grassley also requested an examination of GM’s planned public share offering due later this year.

A Treasury Department spokesman said at the time of the AmeriCredit deal in July the agency had been notified in advance but played no role in it.

GM said in a statement on Wednesday that AmeriCredit will improve competition and choice in the lease and subprime financing markets in the United States and Canada. The result of the vote on the deal by AmeriCredit shareholders has not been announced.

Barofsky told the Reuters Washington Summit on Tuesday that he was planning to review the IPO to see whether the Treasury, which owns nearly 61 percent of GM, did all it could to maximize the return for taxpayers.

He also said in his August 30 letter to Grassley that his office would look into underwriting and other costs associated with the IPO.

The government extended GM $50 billion in bailout and bankruptcy financing in 2009.

The AmeriCredit deal is expected to close in the fourth quarter.

It would give GM an in-house lending arm for the first time since it sold a controlling stake in GMAC in 2006. GMAC, now known as Ally Financial GKM.N, is 56-percent owned by the Treasury after receiving its own bailout capital.

Analysts have said the AmeriCredit deal addressed a risk to GM’s sales momentum as it prepares for the IPO. Potential investors view the deal as strategic as they look for stability with GM dealers again able to offer customers in-house financing, a business component common to all major automakers.

Consumer loans underpin the overwhelming majority of vehicle sales in the United States. AmeriCredit has a $9 billion auto loan business.

Additional reporting by Kevin Krolicki and David Bailey in Detroit; editing by Carol Bishopric

Our Standards:The Thomson Reuters Trust Principles.
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