The Treasury Department says it will purchase $5 billion in senior preferred equity with an 8% dividend from mortgage and auto finance company GMAC LLC as part of a broader program to assist the domestic automotive industry in becoming financially viable.
Under the agreement, GMAC must be in compliance with the executive compensation and corporate governance requirements of Section 111 of the Emergency Economic Stabilization Act, as well as enhanced restrictions on executive compensation.
GMAC will issue warrants to the Treasury in the form of additional preferred equity in an amount equal to 5% of the preferred stock purchase that will pay a 9% dividend if exercised.
Additionally, the Treasury has agreed to lend up to $1 billion to General Motors (GM) so that GM can participate in a rights offering at GMAC in support of GMAC's reorganization as a bank holding company. This commitment is in addition to the assistance previously announced for GM on Dec. 19. This loan will be exchangeable at any time, at the Treasury's option, into the GMAC equity interests being acquired by GM in the rights offering.
SOURCE: U.S. Treasury