GMAC Loans $635M to ResCap; Credit Ratings Suffer
According to Bloomberg, last Thursday, GMAC loaned its Residential Capital (ResCap) mortgage unit $635m. ResCap needed the money to get a credit line to sell a financing business. On Friday, Standard & Poors lowered GMAC's and ResCap's credit ratings to medium "junk" status. Hang on; wasn't the whole point of separating GMAC from GM to get a better credit rating? Auto loans (GMAC's primary business) packaged as securities aren't affected by the downgrade; they're rated separately. But GMAC will now find it more difficult to get the warehouse funding it needs to accumulate those loans. Reuters quotes a Cerberus spokesman, who said tut-tut. Apparently, GMAC is "a resilient business platform with strong long-term growth prospects." Yes, well, anyone remember Aegis Mortgage?
More by Frank Williams