GMAC raises $21.2 billion in debt swap, gets $6 billion government funds

The US treasury has purchased $5 billion in preferred stock directly in GMAC Financial Services and disbursed $1 billion to General Motors Corp to buy GMAC equity after the car finance firm said bondholders representing $21.2 billion of its debt had agreed to the terms of a debt-for-equity swap.

The treasury disbursed $1 billion loan to automaker GM to help it buy equity in support of GMAC's conversion to a bank holding company and make it eligible for a portion of the $700 billion bank rescue package.

GMAC said bondholders tendered $17.5 billion, or 59 per cent, of its GMAC notes, and $3.7 billion, or 39 per cent, of its Residential Capital notes.

The debt swaps were well short of the level GMAC previously said it needed to met its capital goal of $30 billion.

Standard & Poor's Rating Services cutting certain debt ratings on GMAC to ''selective default'' after the deal was announced, devaluing the bonds that had not been swapped.

GMAC, which has been hit by the downturns in both the automotive and housing markets, posted losses totaling $5.59 billion for the first three quarters of this year.

Prior to the conversion and a debt-for-equity swap, GMAC was 51 per cent owned by private equity firm Cerberus and 49 per cent by GM.

GMAC plans to expand its lending programme to expand lending to more buyers to help push auto sales.