Magazine article American Banker

GMAC Unit's Rating Would Rise If It Were Spun off, Agencies Say

Magazine article American Banker

GMAC Unit's Rating Would Rise If It Were Spun off, Agencies Say

Article excerpt

The three biggest rating agencies gave General Motors Corp.'s residential mortgage unit an important vote of confidence Thursday by assigning it investment-grade ratings that in two cases are higher than those assigned to its immediate parent.

But, in an aside that may only add to the speculation surrounding the mortgage unit's future, each agency said that the unit would merit an even higher rating if it had no affiliation with GM or the immediate parent, General Motors Acceptance Corp.

GM reorganized its residential mortgage business last month by putting the GMAC Mortgage Corp. and GMAC Residential Funding Corp. units under a new unit called Residential Capital Corp. Part of the motivation was GM's desire to obtain investment-grade ratings for that business when the rest of the Detroit automaker's credit ratings are falling to junk status.

Fitch Inc. gave ResCap a senior unsecured debt rating of BBB, two notches better than the rating for GMAC. Standard & Poor's Corp. gave ResCap a rating of BBB-minus, also two notches better than its parent.

Moody's Investors Service Inc., the only agency among the big three that still rates GMAC debt as investment grade, rated ResCap's debt Baa2. All three agencies have a negative outlook for ResCap, but all three said the unit would merit a slightly higher rating if it were a stand-alone.

In a press release Thursday announcing a planned private bond offering by ResCap, GMAC said it has "no intention of divesting [ResCap], in whole or in part." GMAC made the same claim when it formed ResCap, but has not been able to quiet rumors that the mortgage unit could be spun off. …

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