GMAC has final test to become bank

GRAND BLANC, Mich. - The financing arm of General Motor's Corp. had until midnight last night to clear a final hurdle in its quest to become a bank holding company, even though it already received the Federal Reserve's stamp of approval earlier this week.

GMAC Financial Services LLC had until 11:59 p.m. last night to complete a complicated debt-for-equity exchange. Its effort to raise $30 billion in equity from bondholders was helped along late Wednesday by the Fed's decision making the ailing auto and home loan provider eligible to access part of the government's $700 billion bank rescue fund.

GMAC wouldn't say yesterday how close the company was to completing the exchange. Yet both actions - completion of the debt exchange and the Fed's acceptance of GMAC as a bank holding company - were tied to each other.

The Federal Reserve apparently needed to see that the bondholders were willing to inject more capital into GMAC, a critical requirement to get bank holding status. GMAC bondholders needed reassurance that the Fed would approve GMAC's application to qualify for federal aid.

Shares of GM rose 41 cents, or nearly 13 percent, to $3.66 yesterday.

Analysts had speculated that without financial help, GMAC would have had to file for bankruptcy protection or shut down, dealing a serious blow to GM's own chances for survival. The Fed cited "emergency conditions" in justifying its decision.

GMAC's goal is to reach $30 billion in capital, most of which would come from the exchange of debt. Another part of the equity requirement included a demand from the Fed that $2 billion of the total come from new equity. So far, GMAC has received a commitment of $750 million from its parents GM and Cerberus Capital Management. It is unclear whether that funding would come from the bridge loans the Treasury granted GM and Cerberus-owned Chrysler LLC earlier this month.

GMAC spokeswoman Gina Poria said she couldn't speculate on the precise "tipping point" that prompted the Fed to act on GMAC's application earlier than generally expected.

Becoming a bank holding company would qualify GMAC to access the government's bank rescue funds.