Small BusinessGMAC Financial to get additional US aid of $3.5 bn: WSJ
Troubled consumer finance firm GMAC Financial Services is likely to get around $3.5 billion (around Rs 16,350 crore) of additional aid from the US government to help cover its mortgage losses, a media report has said.
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"GMAC Financial Services is close to get about $3.5 billion in additional aid from the US government, on top of $12.5 billion (around Rs 58,394 crore) already received since December 2008," the Wall Street Journal (WSJ) said quoting people familiar with the situation.
The announcement in this regard, is expected within the next few days and would coincide with GMAC taking additional steps to absorb losses related to its mortgage operations.
Earlier, the Treasury had said this year it would make as much money available to GMAC as needed to fill its capital hole and projected the firm would need another government infusion of as much as $5.6 billion.
The WSJ further said quoting sources that the new capital is likely to allow GMAC to avoid placing its ailing mortgage unit, Residential Capital (ResCap), into bankruptcy.
The government"s existing 35.4 per cent stake in GMAC is likely to eventually increase, a move that could give the government more control over the firm, including the right to appoint additional directors to GMAC"s board.
"The cleanup (steps taken to absorb losses) is designed to return the Detroit-based finance company to profitability in the first quarter of 2010," WSJ said citing sources. Meanwhile, GMAC spokeswoman said GMAC wants to prepare itself to repay the US government.
"GMAC has been conducting a strategic review of its business and evaluating options to address challenges in its mortgage operation," the spokeswoman told WSJ.
GMAC has only filled a portion of its capital hole and, unlike other banks that participated in the stress tests, has been unable to attract much capital from private investors.
The willingness by the US Treasury to deepen taxpayer exposure to GMAC reflects the troubled company"s importance to the revival of the auto industry, the report said.
WSJ further added that the additional financing comes as many other companies that received large sums of government aid have begun repaying the government, including Citigroup Inc and Bank of America Corp.