GMAC says it’s still "tabulating" the results of its bond exchange, which means we still don’t know whether the crucial 75% hurdle has been reached. If it isn’t, then what? On Friday morning, the answer was clear:
The deadline for that restructuring is Friday, and it must be completed for GMAC to become a bank-holding company.
Come Friday afternoon, however, things looked very different:
Becoming a bank-holding company "certainly takes the pressure off them," [fund manager] Mr. Kaufman said of GMAC…
The Fed’s actions take some of the pressure of the debt exchange, which had struggled to attract sufficient investor interest. "With the primary regulator on board, the capital-raise machinations seem almost a moot point," wrote CreditSights analysts in a note.
Is the Fed really on board? Its language can be read as saying that its approval is contingent on the recapitalization being successful:
In analyzing financial factors, the Board consistently has considered
capital adequacy to be an especially important aspect. The Board has considered
GMAC’s successful efforts to raise additional capital and that, as a result, GMAC
will be well capitalized on completion of the proposal.
That said, it would be politically insane for the Fed to allow GMAC to become a bank holding company with great fanfare on December 24, only to change its mind on the matter come December 29, two business days later. If the GMAC tender offer fails, GMAC might have to come up with some other way of achieving capital adequacy — but the stakes are too high now for the company to lose its bank holding company status altogether.
In other words, the Mexican standoff might well continue, with Cerberus, bondholders, and the Treasury all waiting for one of the others to come up with the necessary cash or debt relief. Who would blink first in such a scenario? I have no idea, but I suspect it would probably be Treasury.