GMAC LLC faces a difficult headwind as it seeks to bolster its capital.

The auto lender will lose $2.75 billion through 2010, including $1.49 billion this year, as it amortizes some of the gains stemming from a debt restructuring last year.

This capital erosion likely played a role in the government's determination that GMAC needs a hefty $11.5 billion in capital. GMAC was one of the 19 banks put through stress tests by the government; GMAC's need for $11.5 billion, a huge ammount relative to the banks' $$21.85 billion in total equity on Dec. 31, was reported by The Wall Street Journal, citing people familiar with the matter.

These stress tests were undertaken to check the financial soundness of the U.S.'s largest financial institutions in the event economic conditions worsen.

Already, GMAC, a recent bank convert and the lender affiliated with General Motors Corp. (GM), incurred a $267 million non-cash expense in the first-quarter due to amortizing the gains from its debt exchange. Regulatory filings indicate that GMAC, in total, would incur $5.5 billion of such so-called non-cash interest expenses related to its complex $38 billion debt overhaul in November. This amount will be spread over the next several years.

GMAC's need to amortize the gains will cost it precious capital at a time when the lender has to fill its $11.5 billion hole. The capital shortfall also comes in an environment where traditional sources of funding remain elusive.

GMAC's non-cash interest expenses "could be one of the factors in the government's evaluation of the company's capital position," said Mark Wasden, an analyst at Moody's Investors Service. "This is one of multiple headwinds that GMAC faces from a capital standpoint."

Wasden declined to comment on the outcome of GMAC's stress test as the final results will only be released Thursday after the close of trading.

To be sure, GMAC could get some relief as the U.S. government has promised more funds to GMAC. GMAC received that assurance after it last week assumed the mantle of lender for new financing to Chrysler LLC's dealers and consumers while the auto maker restructures in bankruptcy court. The size of these funds isn't yet known.

GMAC is also in line to gain access to a federal program that has allowed an array of financial institutions to raise financing when they were otherwise shut out from repaying or refinancing debt as a result of the credit crisis. More than four months after turning itself into a bank, GMAC is still waiting for the green light from the Federal Deposit Insurance Corp. to issue FDIC-insured debt under the Temporary Liquidity Guarantee Program. Under the program's guidelines, as time passes without such approval, the amount of debt GMAC can raise decreases.

The $5.5 billion in non-cash interest expenses are aimed at reversing a portion of the gains from the company's complex $38 billion debt restructuring in November.

A part of the gains from GMAC's debt overhaul came from GMAC swapping its existing debt for debt that has a lower market value. GMAC tacked this gain, along with broader gains associated with the debt restructuring -- such as those fueled by reduced principal -- to its earnings.

Accounting rules require companies to reverse the nominal gain related to the lower market value of the new debt over the life of these new securities.

The bond exchange "was a key component of GMAC's capital raising efforts and a critical step in receiving approval to become a bank holding company," said Gina Proia, a GMAC spokeswoman.

The strapped lender turned itself into a bank in December in efforts to garner federal funding. On the heels of its bank registration, GMAC got $5 billion under the U.S. Treasury's Troubled Asset Relief Program.

Companies typically offset non-cash interest expenses with new earnings or by raising fresh capital.

But "capital markets are not conducive to raising capital for firms such as GMAC and the company faces earnings headwinds," said Wasden at Moody's.

GMAC reported a first-quarter loss of $675 million, widening from a loss of $589 million a year earlier. Its results were aided by a $631 million after-tax gain from retiring debt. Without this gain, GMAC's loss totaled about $1.3 billion amid continued harsh market conditions.

-By Aparajita Saha-Bubna, Dow Jones Newswires; 617-654-6729; aparajita.saha-bubna@dowjones.com