GMAC's bid to become bank in jeopardy

So far, only about $6.3 billion, or 22 percent, of the outstanding GMAC notes have been tendered and about $2 billion, or 21 percent, of the outstanding ResCap notes have been tendered, GMAC said.

The company ended the third quarter with about $9 billion in capital, the most recent figures available, GMAC spokeswoman Gina Proia said.

Bert Ely, a banking industry consultant in Alexandria, Va., said that despite the small amount of notes tendered so far, GMAC’s offers could still be successful, noting that when companies extend offers like this they generally think they are close to getting what they need.

But Dan Alpert, managing director at the investment bank Westwood Capital, said bondholders have little incentive to accept a small percentage of equity for their stakes right now because they think they stand a better chance of recouping a great portion of their investments through the bankruptcy process.

“It’s hard for me to believe that creditors will be willing to take anything less than lion’s share,” Alpert said.

If the offers aren’t successful, GMAC said it will withdraw its application to become a bank holding company. It’s unclear what its next move would be.

GMAC said that if it’s unable to transform into a bank holding company and complete the GMAC and ResCap offers by the end of the year, it would have a “near-term material adverse effect on GMAC’s business, results of operations, and financial position.”

Ely said the bulk of GMAC’s financial problems are tied to ResCap, adding that industry observers have speculated for some time that the struggling mortgage business could eventually be forced into bankruptcy protection.

“One of the things I think they might try to do is somehow sever off ResCap without having to put all of GMAC into Chapter 11,” Ely said.

“There are lots of different moving parts here and there are various options they can take. I’m sure they’ve got a fallback plan.”

Proia said GMAC remains focused on becoming a bank holding company and wouldn’t say what options the company is looking at should that bid fail. She declined comment on the prospect that GMAC or ResCap could file for bankruptcy protection, calling the ideas “highly speculative.”

The finance company has been hemorrhaging money this year, hurt by both the crisis in the mortgage lending industry and slumping demand for vehicles.

Last month, GMAC warned that ResCap could fail. The business accounted for about $1.9 billion of GMAC’s total $2.52 billion third-quarter loss.

GMAC has slashed its costs in an attempt to stem the losses. In September, the company said it would close all of its 200 retail offices and lay off about 5,000 employees, with the bulk of cuts coming at ResCap.

It also has tightened its criteria for U.S. consumers seeking automotive financing, including limiting loans to those with a credit score of 700 or above and restricting contracts with higher advance rates and longer terms.

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