UPDATE: GMAC Exploring Partial ResCap Sale
Dow Jones Newswires - November 21, 2007 1:20 PM ET
Related Quotes
Symbol Last Chg
GM Trade 26.77 +0.48
Real time quote.
DOW JONES NEWSWIRES
GMAC Financial Services and its troubled home-lending arm, Residential Capital LLC, or ResCap, have hired advisors to explore the sale of certain parts of ResCap's operations.
Among possible transactions under consideration is GMAC acquiring a large non-U.S. mortgage-lending institution and merging ResCap's local mortgage business with the acquired institution, the companies said.
ResCap also said it launched a cash tender offer for up to $750 million of its debt securities. The offer will expire at midnight on Dec. 19. The debt buyback is to ensure that ResCap complies with its debt covenants, the companies said. They added that GMAC management intends to recommend a capital infusion to ResCap.
"The purchase of the notes in this tender offer at a discount and the retirement of the notes will increase ResCap's income" in the fourth quarter, the companies said.
ResCap, a once hugely profitable mortgage operation partly owned by General Motors Corp. (GM) through its 49% stake in GMAC, reported a big loss for the third quarter. Investors are now searching for the bottom at ResCap, trading the unit's debt securities at levels usually associated with a company that could soon seek bankruptcy-court protection. GMAC and ResCap have indicated no such plan. Last week, GMAC said it will bring in a new chief financial officer, and executives say ResCap is working to reduce its payroll and its lending operations.
Because of ResCap's exposure to subprime loans, GM was forced to inject $1 billion of equity into GMAC during the first quarter, and it may have to put up yet more cash.
In recent trading, GM shares were at $27.52, up $1.23, or 4.7%.
-By Mike Barris, Dow Jones Newswires; 201-938-5658; mike.barris@dowjones.com
> Dow Jones Newswires
11-21-07 1320ET
Copyright (c) 2007 Dow Jones & Company, Inc.
AI
