GMAC obtains $21.4-billion loan

Bonds of mortgage and auto lender GMAC rallied Wednesday after Citigroup Inc. agreed to lend $21.4 billion to the company, which is owned by General Motors Corp. and Cerberus Capital Management.

The support enables Detroit-based GMAC to finance new loans after the worst housing slump in 16 years has reduced the company’s access to credit and caused losses of more than $1.15 billion at its Residential Capital home-loan unit.

“It certainly helps GMAC out of a tight spot,” said Nigel Sillis, director of fixed-income research at Baring Asset Management.

The price of GMAC’s 7.75% notes due in 2010 rose 91 cents to 95.87 cents on the dollar.

Citigroup, the largest U.S. bank, was part of the group led by private equity firm Cerberus that bought a 51% stake in GMAC from General Motors last year.

Michael Klein, co-head of Citigroup’s investment banking and trading group, is a member of GMAC’s board.

“With Citigroup being part and parcel of the private equity funding, I suppose it makes sense to protect the investment,” Baring’s Sillis said.

The new credit line, which Citigroup may syndicate to other lenders, has a one-year term, GMAC spokeswoman Gina Proia said. The credit line replaces a $10-billion, three-year facility set up last year.

GMAC isn’t disclosing the interest rate on the new agreement, Proia said.