Moody’s grants GMAC stay of execution

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By:
Kathryn Tully
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Moody’s says that it intends to keep GMAC’s senior unsecured Ba1 rating under review for the time being, breaking its rule of resolving ratings within three months of announcing a review.

GMAC’s ratings were placed on review last October when parent General Motors announced that it wanted to sell a controlling interest in its finance unit in order to get a better rating for the subsidiary and lower its cost of funding.

The rating agency said in a statement in late January that it was deferring its decision because, although no sale of GMAC had been announced, GM officials had indicated that they were conducting due diligence with potential investors. Wachovia, working with a number of private equity firms, is one strategic buyer believed to be interested. “In Moody’s view, there remains a reasonable probability that GM will reach an agreement to sell the GMAC stake,” it said.

However, the agency says that if the sale was not negotiated in what it called a reasonable time frame, it might relink GMAC’s ratings with those of GM’s.

At the moment, Moody’s ranks GMAC three notches above GM in anticipation of a sale. And it warned that even if it feels that GM is still making progress with the sale of part of GMAC, it might downgrade GMAC’s ratings anyway if any further deterioration of the parent’s business were to worsen GMAC’s credit profile. It says that if this happened the stand-alone residential real estate finance business, ResCap, might also be downgraded.