GMAC/ResCap Note Exchange Gathering Steam

GMAC Financial Services says it is beginning to make progress on its $38 billion note exchange program, which is key to its financial survival. According to a statement released by the company, investors that control 58% of GMAC's outstanding notes and 37% of Residential Capital Corp.'s have agreed to swap their notes or accept a cash tender offer. GMAC, the parent of ResCap, the nation's sixth largest servicer, needs a 75% participation rate from note holders to reach its goal of amassing enough regulatory capital to become a bank holding company and tap the Treasury's TARP program. The company has offered investors 55 to 85 cents on the dollar in cash or in the form of new bonds and/or preferred shares. Late last week participation in the program was at about 25% or less. ResCap continues to service residential loans but its production network has been cut to the bone. GMAC owns a depository in Utah but is not a bank holding company, at least not yet. It recently extended the deadline for its note exchange programs. GMAC's two owners - General Motors and Cerberus - are still waiting on government loans to bail out their respective auto businesses.