GMAC unit to get $750 million funding from GM, Cerberus

10 May 2008

Finance company GMAC LLC will get emergency funding of up to $750 million from equity firm General Motors Corporation and Cerberus Capital Management LP.

This is part of a $3.5 billion financing package that will help GAMC's battered Residential Capital LLC mortgage unit avoid a cash shortfall.

The cost would be split between GM and the Cerberus affiliate Residential Funding Corporation according to their stakes, GMAC said in a filing with the Securities and Exchange Commission.

GM, the world's biggest automaker, and Cerberus, the New York-based private equity firm, may pay debt holders as much as $750 million if ResCap defaults, the Detroit-based auto and home lender said in the filing.

GM, which sold 51 per cent of GMAC to Cerberus-led investors in 2006, had earlier said it had no obligation to support ResCap after the GMAC unit was battered by subprime mortgage losses.

ResCap, ranked among the 10 biggest US mortgage lenders last year, may liquidate some assets, including mortgage securities, secured loans to raise an additional $600 million.