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Home loan firm ResCap seeks capital

May 06, 2008|From Times Wire Services

Residential Capital, the mortgage-finance company owned by GMAC, said Monday that it might not be able to meet debt obligations unless it finds an additional $600 million by the end of June.

ResCap, the eighth-largest home loan firm, on Monday began offering as little as 80 cents on the dollar to exchange or buy back $14 billion of bonds to extend maturities and stave off bankruptcy.

To finance the debt restructuring, the Minneapolis lender is seeking a new $3.5-billion credit line from its parent GMAC, which is owned by General Motors Corp. and an investor group led by Cerberus Capital Management.

"There is a significant risk that we will not be able to meet our debt service obligations, be unable to meet certain financial covenants in our credit facilities and be in a negative liquidity position in June 2008," ResCap said in a filing with the Securities and Exchange Commission.

Record U.S. home foreclosures have led to six straight quarterly losses totaling $5.3 billion, eroding ResCap's cash position and pushing it closer to violating loan agreements.

ResCap said it was trying to amend the credit terms.

ResCap also wants GMAC to contribute $350 million of ResCap notes outstanding to the mortgage lender by the end of May and lend it $150 million more under an existing credit facility.

Even if all those actions are successful, ResCap said it would need to sell certain assets or raise capital in other ways to get the additional $600 million by the end of June.

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