ResCap Bondholders Begrudgingly Accept Tender Offer

Residential Capital announced that the company could go forward with the $14 billion proposed tender offer to stave off bankruptcy. ResCap, the mortgage finance unit of GMAC, has been hit very hard by the credit crisis. The company had losses totaling $5.3 billion in the past six quarters, with no end in sight, threatening its ability to remain an ongoing concern. Although the holders of the debt threatened to oppose the restructuring, they ultimately had little choice as any holdouts to the plan would have become subordinated to a very long line of creditors. Simply stated, since bonds are no longer issued in paper due to advances in technology, their claims on the company would've actually been worth less than toilet paper.
The tender offer requires debt holders to exchange their notes for new notes with longer maturities. Holders of the short term debt will receive new notes worth as much as 100 cents on the dollar, while longer term debt holders will receive new notes worth roughly 80 cents on the dollar. GMAC, the parent, would help finance the tender offer by increasing its credit line to ResCap, again, by $3.5 billion. GMAC's credit line would become senior to all the existing note holders. What ResCap should've done was issue PIK toggle bonds, similar to those I mentioned in my prior post this morning. If you have the option of rolling debt into more debt, you don't even need to get approval to screw the debt holders. The buyers of the debt sign up to get screwed from the get go.
Why should anyone even care about yet another mortgage lender going bankrupt? Well, Rescap's inability to remain an ongoing concern would threaten GMAC's viability, which would hurt GM. Most people who purchase cars from GM use GMAC for financing. Furthermore, GM still owns 49% of GMAC, meaning it would take a financial hit as well. The possible failure of ResCap would clearly have negative reverberations beyond the mortgage finance market. Why investors are willing to take this risk by purchasing shares in GM is a complete mystery to me. Anyone with any insight is welcome to comment.