May 19 (Bloomberg) -- Residential Capital LLC, the distressed mortgage-finance company, said it has enough support from bondholders to proceed with its offer to exchange or buy back $14 billion of debt in an attempt to stave off bankruptcy.

ResCap, owned by GMAC LLC, received the ``requisite consents'' from holders to move ahead with the plan, according to a statement yesterday, which didn't say how many tendered. Minneapolis-based ResCap is offering investors as little as 80 cents on the dollar to extend maturities and reduce debt.

The exchange buys ResCap time to come up with money to pay its debts and avoid a default. Record U.S. home foreclosures led to six straight losses totaling $5.3 billion for ResCap. The bankruptcy threat left bondholders with little choice but to tender, high-yield research firm KDP Investment Advisors said last week. Even after the tender and financing from GMAC's parents General Motors Corp. and Cerberus Capital Management LP, ResCap said it needs $600 million by June to avoid default.

``My feeling is they get something done,'' Matthew Eagan, vice president at Loomis Sayles & Co. in Boston, which manages $8 billion of high yield, said before the announcement. ``Who knows what you're going to get on the other side.''

Loomis owns ResCap debt, according to January and February filings. Eagan declined to say whether he still owns the bonds.

Bondholder Opposition

ResCap also extended the early deadline for the offer until May 21. The original early deadline expired May 16, after which ResCap offered to give bondholders as little as 77 cents on the dollar's worth of new debentures. The tender expires June 3.

The exchange is contingent on the company getting a new $3.5 billion credit line from GMAC. Detroit-based GM and New York- based Cerberus agreed to guarantee the first $750 million of the borrowings.

Some bondholders had initially sought to build opposition to the plan, which pushes back debt maturities until 2010 and 2015, according to Evan Flaschen, a partner and chairman of the financial restructuring group at Bracewell & Giuliani LLP in New York. No organized protest emerged, he said.

Investors holding debt maturing in 2008 and 2009 were offered as much as 100 cents on the dollar's worth of new 8.5 percent senior secured debt maturing in 2010. Bondholders owning securities that come due from 2010 through 2015 could swap their debt for 80 cents on the dollar's worth of 9.625 percent junior secured debentures maturing in 2015 by the early deadline.

Taking Chances

ResCap's $2.49 billion of 6.375 percent notes due in 2010 rose 3.5 cents to 55.5 cents on the dollar today, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The debt yields 42 percent, or about 40 percentage points more than similar-maturity Treasuries, Trace data show.

Those holders that choose to keep their existing bonds will rank behind the new debt in bankruptcy.

Investors may be compelled to tender their bond because ``you're going to be even worse off if it goes through,'' said Christopher Wolfe, an analyst at Fitch Ratings in New York. ``This is the decision everybody has to try and make: Are you better off going the exchange route or are you better off taking your chances in a bankruptcy?''

Credit-Default Swaps

The risk of ResCap defaulting on its debt fell today, as debt investors speculated the exchange offer would succeed in averting a default, credit-default swap prices show.

Sellers of credit-default swaps protecting against a ResCap default for five years are demanding 48.75 percent upfront and 5 percent year, according to CMA Datavision in London. That's down from 50.5 percent upfront and 5 percent a year on May 16. Sellers of the contracts demand upfront payments when they see a risk of imminent default.

The price implies that investors see a 97 percent chance the company will default within the next five years, assuming a 40 percent recovery value on the bonds in the case of a bankruptcy, according to a JPMorgan Chase & Co. valuation model.

Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements. A rise indicates deterioration in the perception of credit quality; a decline, the opposite.

To contact the reporter on this story: Caroline Salas in New York at csalas1@bloomberg.net

Last Updated: May 19, 2008 16:14 EDT