FIG bond deal of the year: Rescap $4 billion debut bond issue
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FIG bond deal of the year: Rescap $4 billion debut bond issue

Rarely, if ever, has an issuer faced such a challenging environment for its debut bond issue.

At a glance:
Deal type:
Rescap three-tranche $4 billion bond issue
Deal structure: $1 billion two-year FRN; $2.5 billion five-year fixed; $500 million 10-year fixed
Lead managers: Bank of America, Bear Stearns, Citigroup, JPMorgan
Launched: June 2005

Talk about price discovery. When Rescap first considered its debut bond issue in June 2005, its borrowing team was presented with wildly conflicting opinions on what price the US-based mortgage finance company would have to pay.

“We joked at one point that you could drive an Escalade through the spread range that people were talking about,” says Louise Herrle, the corporate finance group head and treasurer of Rescap, who was hired from US agency Freddie Mac – one of the world’s largest borrowers – in September 2004 to set up Rescap’s issuing structure.

Rescap is the type of issuer that investors normally can’t get enough of – the seventh-largest mortgage originator in the US, with an investment-grade rating and paying a healthy spread to US treasuries.

But Rescap is a FIG issuer with a difference. It is 100%-owned by General Motors Acceptance Corp (GMAC), the financing arm of troubled auto manufacturer General Motors, whose financial woes had led to a downgrade to junk status in May 2005.

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