The U.S. Treasury Department said Wednesday that it will provide $3.8 billion of new capital to GMAC (GJM).
"Due to a variety of factors, including that the restructurings of General Motors and Chrysler were accomplished with less disruption to GMAC than banking supervisors initially projected, Treasury will commit $3.8 billion of new capital to GMAC rather than the 5.6 billion dollars originally announced," the Treasury department said in a statement.
Before today's announcements, the Treasury had invested $12.5 billion in preferred stock of GMAC. The Treasury owns $13.1 billion in preferred stock in GMAC, through purchases and the exercise of warrants, and 35% of the common equity in GMAC.
The Treasury said it is restructuring its investment in GMAC to protect taxpayers and put GMAC in a position to raise private capital and pay back taxpayers as soon as practicable.
The $3.8 billion of new capital will be provided in the form of $2.54 billion of Trust Preferred Securities, which are senior to all other capital securities of the company, and $1.25 billion of Mandatory Convertible Preferred Stock or MCP.
The Treasury also said it will also receive warrants to purchase an additional $127 million of Trust Preferred Securities and $63 million of MCP which it will exercise immediately at the closing of the transaction.
Additionally, the Treasury said it will convert $3.0 billion of its existing MCP, which was invested in May, into common equity to boost the quality of the capital supporting GMAC. The move will increase the Treasury's equity stake in GMAC from 35% to 56%.
Corresponding with the increase in ownership, the Treasury will have the right to appoint two additional directors to the GMAC board. Four of nine directors will ultimately be appointed by the Treasury, which plans to nominate its new directors in time for GMAC's annual meeting at the end of April.
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