GMAC Says it Will Boost Tier 1 Capital
NEW YORK — On Monday, GMAC Financial Services confirmed capital requirements resulting from the Federal Reserve's Supervisory Capital Assessment Program.
Basically, as part of this program, GMAC said by Nov. 9, it plans to increase the common shareholder equity component of its Tier 1 capital by $11.5 million.
According to officials, $9.1 billion of this increase must be new Tier 1 capital.
To increase capital, GMAC said it is considering issuing new common equity, issuing mandatory convertible preferred shares or converting existing equity into a form of Tier1 common equity.
By June 8, the company must provide the Federal Reserve Bank of Chicago with its plan to attain the capital requirements.
"Ensuring the availability of credit to consumers and businesses is a key component in stabilizing the economy and a top priority at GMAC," stated GMAC chief executive officer Alvaro de Molina.
"We support the government's efforts to shore-up the banking system and expect that the additional capital raised will further strengthen GMAC and aid in achieving our strategic objectives," he added.
Officials noted that these capital requirements do not include the additional capital necessary to finance Chrysler dealers and customers in relation to the GMAC's agreement with the automaker.
Moreover, the U.S. government has said it plans to support GMAC by providing the capital needed for the company to offer financing for Chrysler dealers and customers.