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| General Motors may sell a controlling interest in the financial services unit that owns its massive mortgage operations.
The automaker said Monday that it is “exploring” options to further enhance General Motors Acceptance Corp.’s liquidity position and its ability to support GM/GMAC synergies. One of those options is “the possible sale of a controlling interest in GMAC to a strategic partner, in order to restore GMACs investment grade credit rating and renew its access to low-cost funding,” according to prepared remarks by GM Chairman and CEO Rick Wagoner. Following such announcement, Fitch Ratings reported that it placed the ratings of GMAC and Residential Capital Corp. on Rating Watch Evolving, which indicates that ratings could be raised, lowered, or maintained at current levels. Fitch said it believes the sale “presents unique challenges” because of GMACs large size — $309 billion of assets at June 30, 2005. A majority sale of GMAC would allow Fitch to separate the ratings of GMAC from GM. However, a single purchaser of 51% may not have balance sheet capacity to fully consolidate GMAC, Fitch said. Additionally, “many strategic buyers potentially have inherent conflicts of interests in that they may have competing financing businesses, such as residential mortgage. Lastly, a transaction must suit the needs of GM, which will continue to have a sizable equity interest in GMAC,” the ratings agency said, noting that an important consideration in any sale is preserving the mutually beneficial relationship between GM and GMAC. Fitch opinioned that “GM will pursue a transaction with some urgency if for no other reason to maintain GMACs franchise value.” The move is one of several GM has taken to stem the hemorrhaging from a string of losses — this time around a third quarter loss of $1.6 billion. The automaker has already agreed to sell a 60% equity stake in its commercial mortgage business to a pool of investors. It also completed the restructuring of its residential mortgage business into a single subsidiary, Residential Capital Corp., or ResCap, “which enables it to command a higher credit rating than GM/GMAC…and that’s crucial to our ongoing success in this business,” Wagoner said. At that time the company said it had no intention of divesting the residential mortgage unit. Mortgage production at GMAC last year was reported at $147 billion — the fifth largest as reported by MortgageDaily.com. |
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Coco Salazar is an assistant editor and staff writer for MortgageDaily.com.E-mail: s3celeste@aol.com |
