NEW YORK, June 4 (Reuters) - GMAC LLC said on Wednesday it has completed a $60 billion refinancing for its money losing mortgage arm, Residential Capital LLC, which is designed to buy time to turn around the struggling lender.
The package includes refinancing outstanding, unsecured debt with new, secured bonds, as well as renewing bank credit lines and new capital injections from GMAC and private equity firm Cerberus Capital Management LP, which owns 51 percent of Detroit-based GMAC.
“This refinancing is expected to provide GMAC and ResCap with the important liquidity and financial resources to execute our business plan,” Sam Ramsey, chief risk officer at GMAC, said in a release.
As part of the refinancing, GMAC obtained a new $11.4 billion secured, three-year revolving credit facility, and a renewed a $10 billion, one-year commercial paper back-up facility.
ResCap also extended “substantially all” of its bilateral bank facility, totaling around $11.6 billion, and obtained a new $2.5 billion whole loan repurchase facility.
In addition, the company completed tenders and exchanges of its bonds, totaling $14 billion.
“The refinancing package announced by GMAC/ResCap is a positive, and it will help ResCap through its near-term liquidity challenges,” Thomas Ferguson, analyst at KDP Investment Advisors said in a report.
“Also, the fact that ResCap’s owners - both GMAC and Cerberus - remain willing to pony-up cash in order to keep the mortgage subsidiary afloat, strongly suggests that they still see something there that’s worth saving,” he said.
ResCap said on Tuesday GMAC and Cerberus will inject more than $1.4 billion in cash into the lender, adding it needed more cash because “adverse” conditions left it unable to sell about $1.3 billion of assets.
The lender had estimated on May 5 that it needed to raise $600 million by June 30 to pay its debts. ResCap has lost $5.3 billion in the prior six quarters and said in a regulatory filing on Tuesday that its liquidity problems could grow. For details, see [ID:nBNG62741]
“ResCap’s inability to consummate various planned asset sales raises questions as to the market’s view of the value of those assets,” said KDP’s Ferguson.
“While it seems ResCap has gotten the support it needs to continue pursuing its turnaround, there remains a huge amount of uncertainty as to whether those efforts will ultimately be successful,” he added.
Reporting by Karen Brettell;