(Bloomberg) – GMAC LLC plans to sell $4.25 billion of three-year notes guaranteed by the Federal Deposit Insurance Corp. in the first government-backed bond offering by a speculative-grade company.

The auto and home lender that received $13.5 billion in U.S. funds is selling $3.5 billion of fixed-rate notes that may pay interest at the benchmark mid-swap rate, and $750 million of floating-rate debt that may pay interest at the London interbank offered rate, according to a person familiar with the offering who declined to be identified because terms aren’t set.
GMAC’s access to the FDIC’s Temporary Liquidity Guarantee Program was granted as the government seeks to shore up the automobile industry, said Guy Lebas, chief economist at Janney Montgomery Scott LLC in Philadelphia. The lender’s non- guaranteed debt is rated C by Moody’s Investors Service and CCC by Standard & Poor’s, one and four levels above default.

“They gained access to the program more because of their importance to the auto sector recovery,” Lebas said. “It certainly provides a strong degree of support.”

The lender’s last benchmark dollar-denominated offering was in May 2007, when it issued $2 billion of notes, Bloomberg data show.

Bond Trading

GMAC’s 7.25 percent notes due in 2011 rose 2.25 cents on the dollar yesterday to 92.25 cents to yield 12.31 percent, or 11.36 percentage points relative to benchmark rates, according Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

Banks have issued $240 billion of debt under the TLGP since Nov. 25, Bloomberg data show. The program opened a new channel of funding for financial institutions unable to issue debt in U.S. markets after the September collapse of Lehman Brothers Holdings Inc. By paying the FDIC a fee to back their bonds, banks are able to issue debt with a top AAA credit rating.

“If it goes well, I think they’ll continue to issue as much as they can under the FDIC umbrella,” said Michael Skinner, a government agency and TLGP bond trader at Wall Street Access, a broker-dealer in New York.

GMAC Financial Services hired Bank of America Corp., Barclays Plc, Deutsche Bank AG and JPMorgan Chase & Co. to underwrite the transaction, said the person familiar with sale. The securities will mature in December 2012. GMAC spokeswoman Gina Proia declined to comment.

Auto Financing

The lender has received government funds to provide financing for customers and dealers of General Motors Corp. and Chrysler LLC.

GMAC, whose biggest stakeholder is the U.S. government, has been unable to sell debt as its credit ratings fell amid declining auto sales and record foreclosures at its mortgage division. The company posted losses in six of the past seven quarters, Bloomberg data show.

GM, the largest U.S. automaker, filed for bankruptcy on June 1 with a government-financed plan intended to create a viable company that can compete in world markets. The U.S. government will extend $50 billion of loans to the 100-year-old automaker, according to a filing in U.S. Bankruptcy Court in New York. Auburn Hills, Michigan-based Chrysler filed for a U.S.-backed bankruptcy on April 30.