General Motors up 10 percent pre-open as GMAC clears a major hurdle: They say they have raised enough capital to satisfy the Fed's condition to become a bank-holding company.
Recall that GMAC was supposed to raise $30 billion by converting 75 percent of its issued debt into preferred-stock holdings. We do not have details of how this was done.
But the Federal government is buying $5 billion of preferred equity with an 8 percent dividend yield. The Treasury will will also lend $1 billion to GM so they can participate in a rights offering to support GMAC's reorganization as a bank holding company.
This appears to be a new program operating within the Troubled Assets Relief Program (TARP) — so we now have a program specifically designed to invest in auto companies.
This is all in addition to the recent $17.4 billion in loans that was approved to help GM and Chrysler.
So GMAC is now operating as a federally chartered bank. They can have their debt temporarily guaranteed by the FDIC, and get access to the Fed's discount window for short-term loans.
GMAC immediately announced it was resuming auto financing for a broader spectrum of customers. The pulling of credit is a major reason sales at GM have plummetted recently.
GM owns 49 percent of GMAC, Cerberus owns the rest, but this will now be reduced due to the Fed's investment.
1) Can the Dow Chemical deal with Rohm and Haas get done? The Financial Times say they can still tap a $13 billion bridge loan to pay for the takeover, and that they would likely try to renegotiate the price as well.
2) Comp store sales declined 1.8 percent in the week ending December 27, according to the ICSC, which noted that the 2008 recession, widespread heavy discounting and adverse pre-holiday weather all coalesced to produce the weakest holiday season since at least 1970.
ICSC expects December comparable-store sales will decline by at least 1 percent, with broad swaths of the industry experiencing double-digit declines.
3) The Nikkei has closed out its year down 42.1 percent, its worst performance in history (it began in 1949). The S&P 500 has declined 41 percent this year as well.
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