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Old 12-29-2008, 01:01 PM   #1

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Deadline passes without word on critical GMAC vote

GMAC, General Motors' finance arm, was granted bank holding status, but there is still no word on whether the bond buyback was successful. The deadline for GMAC to have converted enough of its bonds - said to be 75 percent - into $28 billion in liquidity was on Friday, December 26, at 11:59 p.m. In return for bondholders converting their bonds to those of lesser value, they would receive a higher dividend.

Two weeks ago, GMAC said it found a slew of new bondholders, but didn't say whether the new participants would put it above the threshold. Now more than two days past the deadline, GMAC has only said "We have not yet issued final results but intend to in the near term." This kind of silence usually means that things didn't go as planned, but other plans are afoot. While it's not impossible, we'd be shocked if GM had fulfilled The Fed's requirements by the deadline and chose to remain quiet about it.

After all, success for GMAC means success for GM. But bankruptcy for GMAC - which could happen without access to TARP funds - could mean something very close to doom for a lot of dealers and for GM. Our guess is that GMAC and The Fed are trying to figure out the best way forward, because it is certain that the government doesn't want to see its $17.4 billion dollar investment go bust because GM lost on a side bet less than a month later.
Go from the presence of a foolish man, when thou perceivest not in him the lips of knowledge

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