updated 12/10/2008 2:58:53 PM ET 2008-12-10T19:58:53

GMAC Financial Services, the financing arm of General Motors, said Wednesday that its bid to become a bank holding company and qualify for aid under the government’s $700 billion bank rescue plan may be in danger because it hasn’t raised the capital needed to meet federal requirements.

One analyst said that if GMAC doesn’t get the help it needs, it may need to shutter its home mortgage division in order to prevent the entire company from filing for bankruptcy protection.

It wasn’t clear what impact that would have on its owners, the automaker General Motors Corp. and the private equity firm Cerberus Capital Management LP.

But GM, which owns a 49 percent stake in GMAC, did not include any possible federal aid to GMAC in the restructuring plan that the automaker submitted to Congress in an effort to get its own government loans, said GM spokeswoman Renee Rashid-Merem.

“Our plan is based on GM’s operations,” she said.

GMAC, which provides both mortgage and car loans, is trying to reduce its debt and raise $30 billion in capital that regulators are requiring before it can become a bank holding company and possibly get access to government assistance.

It warned that a failure to convert to a bank holding company would have a “material adverse effect” on its business.

The finance company is raising capital by offering to exchange debt for cash, notes or preferred stock. But it said Wednesday it has only raised about $8.3 billion through the offers so far.

In a last ditch effort, GMAC extended the early delivery time under its offers by three days, to Friday.

It was the third time that the New York-based company has extended the deadline. Cerberus Capital owns 51 percent of GMAC while General Motors owns the rest.

Peter Duda, a spokesman for Cerberus, declined comment citing the pending exchange offer.

GMAC is trying to exchange $38 billion of debt held by its divisions and mortgage business, Residential Capital LLC, for cash, new notes or preferred stock.

If GMAC were to become a bank holding company, it could potentially be eligible for part of the government’s $700 billion rescue package for the financial sector.

GMAC has said that the aid would give it the cash needed to make loans to consumers who want to buy a car or truck but have been unable to get affordable financing. Looser credit markets and cheaper financing also would drive consumers back to dealer lots and in theory boost automaker sales.

GM and fellow U.S.-based automakers Ford Motor Co. and Chrysler LLC are asking Congress for their own financial bailout.

Detroit-based GM has said that it could run out of cash by the end of the year if it doesn’t receive financial help.

In order to approve GMAC’s application to become a bank holding company, the Federal Reserve has said the company needs at least $30 billion in regulatory capital. In order to meet that requirement, GMAC said it would have to have about 75 percent participation on its offers.

So far, only about $6.3 billion, or 22 percent, of the outstanding GMAC notes have been tendered and about $2 billion, or 21 percent, of the outstanding ResCap notes have been tendered, GMAC said.

The company ended the third quarter with about $9 billion in capital, the most recent figures available, GMAC spokeswoman Gina Proia said.

Bert Ely, a banking industry consultant in Alexandria, Va., said that despite the small amount of notes tendered so far, GMAC’s offers could still be successful, noting that when companies extend offers like this they generally think they are close to getting what they need.

But Dan Alpert, managing director at the investment bank Westwood Capital, said bondholders have little incentive to accept a small percentage of equity for their stakes right now because they think they stand a better chance of recouping a great portion of their investments through the bankruptcy process.

“It’s hard for me to believe that creditors will be willing to take anything less than lion’s share,” Alpert said.

If the offers aren’t successful, GMAC said it will withdraw its application to become a bank holding company. It’s unclear what its next move would be.

GMAC said that if it’s unable to transform into a bank holding company and complete the GMAC and ResCap offers by the end of the year, it would have a “near-term material adverse effect on GMAC’s business, results of operations, and financial position.”

Ely said the bulk of GMAC’s financial problems are tied to ResCap, adding that industry observers have speculated for some time that the struggling mortgage business could eventually be forced into bankruptcy protection.

“One of the things I think they might try to do is somehow sever off ResCap without having to put all of GMAC into Chapter 11,” Ely said.

“There are lots of different moving parts here and there are various options they can take. I’m sure they’ve got a fallback plan.”

Proia said GMAC remains focused on becoming a bank holding company and wouldn’t say what options the company is looking at should that bid fail. She declined comment on the prospect that GMAC or ResCap could file for bankruptcy protection, calling the ideas “highly speculative.”

The finance company has been hemorrhaging money this year, hurt by both the crisis in the mortgage lending industry and slumping demand for vehicles.

Last month, GMAC warned that ResCap could fail. The business accounted for about $1.9 billion of GMAC’s total $2.52 billion third-quarter loss.

GMAC has slashed its costs in an attempt to stem the losses. In September, the company said it would close all of its 200 retail offices and lay off about 5,000 employees, with the bulk of cuts coming at ResCap.

It also has tightened its criteria for U.S. consumers seeking automotive financing, including limiting loans to those with a credit score of 700 or above and restricting contracts with higher advance rates and longer terms.

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