GMAC gives 5m shares to Treasury

The American federal government will receive five million preferred shares of GMAC in return for its $5 billion (£3.4bn) capital injection.

The troubled lender, the financial arm of General Motors and responsible for making car loans and financing dealer inventories, agreed the terms of the deal with the US Securities and Exchange Commission, which will help it avoid bankruptcy.

According to the filing, the government will also be able to buy 250,000 more GMAC preferred shares for a cent each over a 10-year period.

GMAC said if the US Treasury does not get interest payments of 8% on its preferred shares for six straight quarters it will get two seats on an expanded GMAC management board.

GMAC, which is 49% owned by GM and 51% owned by private equity firm Cerberus Capital Management, disclosed that GMAC will no longer be obligated to provide financing for GM leases and it will no longer provide financing incentive programs for GM vehicle sales.

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