The government will receive preferred shares that pay an eight per cent dividend and warrants to purchase additional shares in return for the money, the department said.

Treasury also said it will lend up to US$1 billion to General Motors (GM) so that the company can purchase additional equity that GMAC is planning to offer as part of its effort to raise more capital.

Serious financial blow

The assistance is part of a larger government effort to aid the auto industry and is on top of the US$17.4 billion in loans the Bush administration agreed to provide to the industry December 19, a Treasury Department official said.

Analysts had speculated that if GMAC did not obtain financial help it would have to file for bankruptcy protection or shut down, which would be a serious blow to GM's own chances of survival.

Last week, the US Federal Reserve approved GMAC's application to become a bank holding company, which made it eligible to receive money from the financial rescue fund.

The Fed's approval was contingent on GMAC raising additional capital.

Separately, GMAC said late Monday that it had accepted all the bonds tendered in a debt-for-equity swap that was also part of its capital-raising efforts.

The company released few details about the results of the swap.

Debt-for-equity exchange

GMAC "intends to act quickly to resume automotive lending to a broader spectrum of customers," the company said in a statement.

The company's goal is to reach US$30 billion in capital, the majority of which would come from the debt-for-equity exchange.

GMAC has struggled to get bondholders to convert 75 per cent of their debt into equity of the company and has yet to say whether it has met its goal.

The Treasury Department's investment in the company does not mean it is "passing judgement" on whether GMAC has met the Fed's requirements to raise additional capital, the official said.

GMAC, meanwhile, said the government's US$5 billion investment was completed Monday. The US$1 billion loan is still in progress, the Treasury official said.

- AP