Breaking! GMAC Pays Off A Credit Card, Buys Back $500 Million In Debt

Earlier this week Bloomberg News reported GMAC, the finance subsidiary of the world's biggest automaker, was looking to seek some capital the old-fashioned way. No, not by inheriting it...the other old fashioned way...borrowing it. The New York mayor's trust-held News company reported it might be selling its first bonds in two years once a group of buyout firms purchases a stake in GM's big financial services unit. That's because GMAC's debt certificates have rallied from the junk-yard status over the past 12 months, hitting the narrowest difference between the yield on its $4 billion of 8% bonds due in 2031 and Treasuries with similar maturities in five years. But today, GMAC Financial Services announced a tender offer for a buy back of $500 million in deferred interest debt certificates due in 2012 and 2015. So what's that mean, as one of our dads used to say, to the price of tea in China — or in this case whether GMAC's going to issue new long-range commercial paper? We've no clue — we only got past "Laws of Commercial Transactions 101" — cognitive thinking skills on the subject were to be learned in 201. But the full press release is after the break so feel free to take your own shot.

2006-09-14

GMAC Announces Tender Offer for Deferred Interest Debentures Due 2012 and 2015

DETROIT – GMAC Financial Services today announced it has commenced tender offers to purchase for cash its outstanding Deferred Interest Debentures due Dec. 1, 2012, and June 15, 2015, for an aggregate purchase price of $500 million or approximately 30 percent of the debentures outstanding. Debentures tendered prior to 5:00 p.m., EDT on Sept. 27, 2006, will receive an early tender premium.

The tender offer will commence Thursday, Sept. 14, 2006, and will expire at midnight, EDT, on Oct. 12, 2006, unless extended.

"Throughout the last few years, we have successfully implemented several innovative funding mechanisms from diversified sources in order to strengthen our balance sheet, despite declining GMAC credit ratings," said Sanjiv Khattri, GMAC executive vice president and chief financial officer. "This small but significant step reflects our strong cash position and now allows us to selectively reduce the level of our higher cost debt. This represents just one of many new opportunities that we believe will help make GMAC even more competitive going forward as a stand alone company."

GMAC is offering $6,600 for each $10,000 Accreted Value (as defined in the Offer to Purchase) at maturity of 2012 Debentures tendered (equal to 78 percent of the $8,460.42 of the Accreted Value of the 2012 Debentures as of October 12, 2006 and equal to 66 percent of the Accreted Value of the 2012 Debentures at maturity). This also includes an early tender premium of $200.00 if tendered prior to 5:00 p.m., EDT, on Wednesday, September 27, 2006 (the "Early Tender Expiration Time").

GMAC is offering $5,600 for each $10,000 Accreted Value at maturity of 2015 Debentures tendered for payment (equal to 70 percent of the $7,948.09 of the Accreted Value of the 2015 Debentures as of October 12, 2006 and equal to 56 percent of the Accreted Value of the 2015 Debentures at maturity). This also includes an early tender premium of $200.00 if tendered prior to the Early Tender Expiration Time.

Holders who do not tender before the Early Tender Expiration Time will not be eligible to receive the applicable early tender premium. For complete details of the tender, holders should read the entire Offer to Purchase.

The tender offer will be financed from GMAC's existing cash portfolio. All Debentures purchased under the offers will be retired upon completion of the tenders. Payments of the tender consideration for the debentures, validly tendered and not withdrawn, on or prior to the expiration date, and accepted for purchase, will be made promptly after the expiration date. Debentures that are not tendered and accepted for payment as part of the offer will remain obligations of GMAC.

The terms and conditions of the tender offer appear in GMAC's Offer to Purchase, dated Sept. 14, 2006. The consummation of the tender offer is conditioned on the satisfaction of customary conditions. If any of the conditions are not satisfied, GMAC is not obligated to accept for payment, purchase or pay for, or may delay the acceptance for payment of, any tendered debentures, and may terminate the tender offer. Subject to applicable law, GMAC may waive any condition applicable to the tender offer and extend or otherwise amend the tender offer.

Questions regarding the tender offer or consent solicitation may be directed to the dealer managers: Morgan Stanley & Co. Incorporated, at 800.624.1808 (U.S. toll-free) or 212.761.1864 (collect); Barclays Capital Inc., at 866.307.8991 (U.S. toll-free) or 212.412.4072 (collect); or Merrill Lynch, Pierce, Fenner & Smith Incorporated, at 888.654.8637 (U.S. toll-free) or 212.449.4914 (collect).

Copies of the Offer to Purchase may be obtained at no charge from D.F. King & Co., Inc., the information agent at 800.859.8511(U.S. toll-free). Investors are encouraged to consult their investment advisor and/or tax professional regarding the tender offer and its opportunities.

Media inquiries should be directed to GMAC Media Relations at the contact numbers below.

GMAC is a global, financial services, limited liability company that operates in 39 countries, in auto finance, residential mortgage, insurance and commercial finance businesses. With more than $300 billion in assets, it generated nearly $2.4 billion in net income in 2005, on net revenues of $19.2 billion. General Motors, which currently owns all of the equity of GMAC, announced earlier this year that it will sell a majority of its interest to a consortium of investors led by Cerberus Capital Management.

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FORWARD-LOOKING LANGUAGE

In this press release and comments by GMAC LLC ("GMAC") management, the use of the words "expect," "anticipate," "estimate," "forecast," "initiative," "objective," "plan," "goal," "project," "outlook," "priorities," "target," "intend," "evaluate," "pursue," "seek," "may," "would," "could," "should," "believe," "potential," "continue," "designed," "impact," or the negative of any of those words or similar expressions is intended to identify forward-looking statements. All statements herein and in related management comments, other than statements of historical fact, including without limitation, statements about future events and financial performance, are forward-looking statements that involve certain risks and uncertainties.

While these statements represent our current judgment on what the future may hold, and we believe these judgments are reasonable, these statements are not guarantees of any events or financial results, and GMAC's actual results may differ materially due to numerous important factors that are described in GMAC's most recent report on SEC Form 10-K, which may be revised or supplemented in subsequent reports on SEC Forms 10-Q and 8-K. Such factors include, among others, the following: the ability of General Motors ("GM"), our parent, to complete a transaction with a strategic investor regarding a controlling interest in GMAC while maintaining a significant stake in GMAC, securing separate credit ratings and low cost funding to sustain growth for GMAC and Residential Capital Corporation ("ResCap") and maintaining the mutually beneficial relationship between GMAC and GM; significant changes in the competitive environment and the effect of competition in the corporation's markets, including on the corporation's pricing policies; our ability to maintain adequate financing sources; our ability to maintain an appropriate level of debt; the profitability and financial condition of GM, including changes in production or sales of GM vehicles, risks based on GM's contingent benefit guarantees and the possibility of labor strikes or work stoppages at GM or at key suppliers such as Delphi Corp.; funding obligations under GM and its subsidiaries' qualified U.S. defined benefits pension plans; restrictions on ResCap's ability to pay dividends and prepay subordinated debt obligations to us; changes in the residual value of off-lease vehicles; changes in U.S. government -sponsored mortgage programs or disruptions in the markets in which our mortgage subsidiaries operate; changes in our contractual servicing rights; costs and risks associated with litigation; changes in our accounting assumptions that may require or that result from changes in the accounting rules or their application, which could result in an impact on earnings; changes in the credit ratings of GMAC or GM; the threat of natural calamities; changes in economic conditions, currency exchange rates or political stability in the markets in which we operate; and changes in the existing or the adoption of new laws, regulations, policies or other activities of governments, agencies and similar organizations.

Investors are cautioned not to place undue reliance on forward-looking statements. GMAC undertakes no obligation to update publicly or otherwise revise any forward-looking statements, whether as a result of new information, future events or other such factors that affect the subject of these statements, except where expressly required by law.

General Motors May Sell Bonds To Meet Debt – Bloomberg [Bloomberg News]

Related:
Breaking! GM Announces $14 Billion Agreement To Sell GMAC; Agrees It's A Chance To Lean Back, Prop Up Feet [internal]