Treasury Invests in GMAC and Lends to GM
The Treasury Department announced that it will purchase $5 billion in senior preferred equity from GMAC as part of a broader program to assist the domestic automotive industry. The Treasury requires that GMAC comply with the executive compensation and corporate governance requirements of the Stabilization Act as a condition to the Treasury's investment.
Additionally, the Treasury has agreed to lend up to $1 billion to General Motors so that GM can participate in a rights offering in support of GMAC's reorganization as a bank holding company. This commitment is in addition to the assistance previously announced for GM on December 19. The level of funding under this facility will be depend on the level of current investor participation in the rights offering, and the loan is exchangeable, at the Treasury's option, for GMAC equity interests acquired by GM in the rights offering. The preferred stock purchase and the loan to support GMAC's rights offering are part of an auto industry-focused TARP program that will include the $17.4 billion in assistance for domestic automakers announced earlier this month.
