In early December, General Motors’ chances of finding a highly rated financial institution interested in taking a controlling stake in GMAC, its finance subsidiary, were receding. The plan, announced in October and intended to take the unit back to investment-grade status and lower its cost of capital, hit a major obstacle when Wells Fargo and Bank of America, two of the most likely contenders for a stake, said they weren’t interested.
With that, spreads on GMAC’s bonds slumped to a seven-week low. As Euromoney went to press, GMAC’s 6.125% February 2007 bonds had widened by 371 basis points in the course of one month to trade at 582bp over US treasuries. Such levels suggest that the market expects GMAC to be stuck indefinitely as a high-yield credit, and locked out of the unsecured bond market.
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