GMAC, ResCap working to restructure debt profile, renew bank loans, pursue strategic alternatives

By Jennifer Lanning Drey

Portland, Ore., April 29 - GMAC Financial Services is working to restructure the broader debt profiles of both GMAC and Residential Capital LLC (ResCap) to address ResCap's near-term liquidity requirements, Robert Hull, chief financial officer of ResCap parent GMAC, said during a company conference call held Tuesday.

Hull said GMAC is working with its bank partners to renew its $12 billion secured bank facility, as well as exploring a variety of options for both GMAC's and ResCap's unsecured revolving credit facilities, all of which mature in June.

"Our goal in this process is to solidify GMAC and ResCap's access to liquidity in a way that also meets the needs of our lenders. These initiatives are consistent with our diversified funding strategy and we expect to be in the market shortly," he said.

GMAC is also pursuing strategic alternatives, including those related to liability management regarding existing debt to ensure liquidity for ResCap, Hull said.

The CFO said he was happy with the company's recent dialogues with its banks and expected to provide more clarity on the discussions in weeks to come.

ResCap has near-term liquidity requirements that include about $4 billion in unsecured and $13 billion in secured debt maturities through the remainder of 2008.

GMAC chief risk officer Samuel Ramsey declined to elaborate on whether the company's desire to extend its maturities applied to its bonds as well as bank loans, during the question-and-answer portion of the call.

"When we finally come to market with our restructure, that will be made more clear," he said.

More GMAC support possible

When asked whether GMAC may provide additional financial support for ResCap, Hull said every option remains on the table with regard to finding a broader funding solution for the GMAC/ResCap enterprise.

"GMAC and its investors are committed to supporting ResCap to the extent that it doesn't imperil the broader franchise, and we believe we've not come to that point yet," Hull said.

As previously reported, in April, ResCap structured a $750 million facility with GMAC to provide financing of mortgage servicing rights.

"Our attention is focused on ensuring we maintain liquidity and we're taking aggressive actions to meet that goal," Hull said.

Other strategic alternatives possible

Beyond possible secured funding that could be provided by GMAC, the company said it is also pursuing alternatives for meeting ResCap's funding requirements including: ongoing and potential use of available committed lines of credit, liquidating certain assets, extending maturities and refinancing or modifying existing debt.

During the call, Hull said liquidating inventory at ResCap would be GMAC's preferred strategy.

ResCap posts $859 million loss

ResCap reported a first-quarter net loss of $859 million, compared to a net loss of $910 million in the year-ago period. The company said that while aggressive actions taken to reduce risk and rationalize the company's cost structure have favorably affected results in the United States, GMAC saw significant deterioration in international operations.

GMAC is working to restructure ResCap largely around conforming domestic products, Hull said.

ResCap had cash and cash equivalents of $4.2 billion at the March 31 first-quarter end, representing a $2 million drop from Dec. 31. Hull said the drop was due to a decline in collateral values financed on secured lines and delays in executing asset sales due to market disruptions.

ResCap has not drawn on its revolving credit facilities, Hull said.

ResCap is a New York-based real estate finance company primarily focused on residential real estate markets in the United States, Canada, Europe, Latin America and Australia.

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