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GMAC Financial Services Announces Key Capital and Liquidity Actions
"These actions represent another major step in stabilizing and strengthening GMAC," said GMAC Chief Executive Officer Alvaro G. de Molina. "Much like last year, 2009 is proving to be a time of landmark actions for GMAC - - executing the Chrysler agreement, launching a new brand for our bank, and now taking a meaningful step forward in permanently improving our access to cost-effective funding."
GMAC previously announced an agreement with Chrysler to provide automotive finance products and services to Chrysler dealers and customers. The agreement was approved by the U.S. Bankruptcy Court on May 12, 2009. GMAC will begin offering wholesale and retail credit to Chrysler dealers and customers immediately. In order to ensure an orderly transition of wholesale financing activities, GMAC has signed a cooperation agreement with Chrysler Financial Services Americas LLC.
GMAC has also entered into a transition support agreement with Chrysler LLC and the U.S. Treasury to aid in managing the risks related to expeditiously extending credit to Chrysler dealers and customers. The agreement provides GMAC with credit support for certain losses that may be incurred during the transition period, which allows time for GMAC to evaluate the creditworthiness of each Chrysler dealer.
As previously disclosed under the S-CAP program, GMAC is required to raise $11.5 billion of Tier 1 common or contingent common capital, $9.1 billion of which must be new Tier 1 capital. The $3.5 billion investment by the U.S. Treasury is new capital for the company toward this program and reduces the level of new capital required to $5.6 billion. Consistent with the S-CAP program requirements, GMAC intends to submit a Capital Plan to the Federal Reserve Bank of Chicago by June 8, 2009 with respect to the remaining capital required. While the U.S. Treasury has indicated that it may be willing to provide additional new capital, GMAC will evaluate other alternatives to meet its capital requirements.
The MCP issued to the U.S. Treasury has an annual distribution rate of nine percent payable quarterly. These interests mandatorily convert to common membership interests after seven years and may be converted in advance of that time by GMAC with the approval of the Federal Reserve if such conversion would not result in the U.S. Treasury owning in excess of 49 percent of GMAC's common membership interests. GMAC may only convert additional mandatorily convertible membership interests to common membership interests if certain other conditions are met. The MCP is also convertible by the U.S. Treasury upon the occurrence of certain events.
Temporary Liquidity Guarantee Program
Ally Bank Exemption
GMAC recently launched Ally Bank, a new brand for its U.S. bank that represents an improved banking experience. The new brand is part of an effort to broaden and expand the company's customer base at the Bank.
In connection with the previously announced GMAC governance changes, the following independent and GMAC management directors on the board resigned, effective immediately, T.K. Duggan, Douglas A. Hirsch, Robert Hull, Samuel Ramsey and Robert W. Scully.
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