Rescap Sells Assets to GMAC and Cerberus to Stay Afloat

In yet another shocking securities filing, ResCap has announced that it will need to raise $1.4 billion more than originally stated before June 30th to stave off bankruptcy. It appears as if the company's problems, which may seem complex on the surface, boil down to a simple mathematical error. ResCap just can't seem to come up with one number that will plug the enormous money-sucking hole in its balance sheet. Alternatively, the company just wanted to force through the tender offer before announcing the severity of its liquidity problem. I'll let you mull that one over.
As recently as May 19th, ResCap had claimed that it only needed an additional $600 million once the tender offer was completed. Just two weeks later, it has more than tripled that number. What is the company doing to secure further capital? It is selling assets to its parent GMAC, as well as the bozos at Cerberus, the private equity firm that took a majority stake in GMAC two years ago subsequently flipping it it to a bunch of private equity Wannabes. Cerberus may be trying to make nice with the investors that it roped into the GMAC deal two years ago when it was "hot." But a closer analysis of the new financing arrangements shows that Cerberus is once again looking after its own hide. Cerberus could just inject fresh capital into the firm in the form of equity, yet has chosen to purchase assets from the firm at distressed prices instead. A very complicated host of assets sales and collateralized loans have been announced. GMAC will increase the size of its loan to ResCap to $1.2 billion from $750 million. ResCap will draw $450 million of that money today. GMAC will buy ResCap's resort-finance business as well as some receivables, while Cerberus will purchase $475 million worth of model-home assets. Cerberus has also agreed to buy or backstop sales of $950 million in mortgage loans or MBS, some of which may not be making timely payments. However, and this is a big "however", some of the assets Cerberus will buy may have been pledged as collateral backing notes that will be exchanged for old ResCap debt or a planned credit facility with GMAC. Translation? We're going to work out all the details in bankruptcy court in a few months.