AcuraZine Community - GM in talks to sell majority stake in mortgage unit

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GM in talks to sell majority stake in mortgage unit

GM in talks to sell majority stake in mortgage unit - - Reuters / March 29, 2005 - - Source: Automotive News

Quote:

DETROIT -- General Motors said on Tuesday it is in advanced talks to sell off a majority stake in its GMAC Commercial Mortgage unit, driven by funding constraints and its own poor credit rating.

A 50 percent stake in the unit is worth about $1 billion, JP Morgan analyst Himanshu Patel estimated.

No definitive agreement has been made, and GM's finance unit GMAC intends "to retain a significant equity interest in the business," GM spokesman Jerry Dubrowski said.

"We're now engaged in advanced discussions with a consortium of investors regarding the sale of a majority stake in Commercial Mortgage."

The commercial mortgage unit originates and services mortgages in a variety of business sectors and generated profits of $204 million last year.

Dubrowski declined to comment on one media report identifying buyout firm Kohlberg, Kravis Roberts & Co. as a top contender for the more than 50 percent equity stake in GMAC Commercial Mortgage that it is up for grabs.

But he took issue with recent reports saying that GM, which has about $23 billion in cash, was orchestrating the sale to add to its cash horde.

"That's really not the case," Dubrowski said. "If there were cash that would come from such a transaction, it would not flow back to General Motors. It would stay within this business. That's the whole point of it, to be able to have funding," he said.

"The capital markets are constrained right now, and as a result of that you know introducing the new investor into the business would help expand its growth more rapidly and more profitably."

Dubrowski was referring to the fact that GM is facing a possible credit downgrade to "junk" status by at least two leading rating agencies. And the embattled auto giant, which had more than $300 billion in debt outstanding at the end of 2004, is increasingly in need for alternative funding sources for some of its businesses.

GM, which has been losing market share and is struggling to revive profits at its core automotive business, warned earlier this month that it expects 2005 overall profit to be as much as 80 percent below its prior forecast.

Despite what some might call negative factors behind the planned sale of GMAC Commercial Mortgage, Patel in a note to clients on Tuesday billed it as a "positive" development that could help improve both GM and GMAC's liquidity.

"Broadly speaking we think the market would be pleased with any such transaction," he said.

Not sure about this one either...

Bad move. GMAC is a cash machine. This is extremely stupid. Plus, if they give up more that 50% they might as well sell is all, because then who knows how well the new people will manage it. This is a stupid, desperate attempt to look like they're making corrective moves when they have $23 billion in the bank just chillin...

Quote:

Originally Posted by titan

Check GM's debt to equity ratio. That $23B 'just chillin', will be burned quickly if they don't get their shit together PRONTO!

GM making another boneheaded move to sell an asset (GMAC) after the market (mortgages) has already peaked. :whyme:

Quote:

Dubrowski was referring to the fact that GM's debt is facing a possible credit downgrade to "junk" status by at least two leading rating agencies. And the embattled auto giant, which had more than $300 billion in debt at the end of 2004, is increasingly in need of alternative funding sources for some of its businesses.

http://www.usatoday.com/money/autos/...ac-stake_x.htm

GM can't sell GMAC. They can shut down Pontiac, Buick, GMC, Saturn, and SAAB, but the firm won't have anything left if they sell GMAC!

There really is no point in knocking our heads against the wall trying to figure out the 'strategery' at GM these days.

IMO - they're in a downward spiral and won't pull out of it until a full blown crisis developes and they can renegotiate the union contracts which are killing them. That and perhaps hire the Infiniti design team.

Quote:

Originally Posted by PistonFan

Well, the $23B means their cash position is strong; but I know what your saying about the debt. They've got $77B in legacy costs coming due in 20 years, and that means there ass is in serious trouble if they can't get the unions to concede to some of GM's needs.

GM needs to remove their heads quickly or you can kiss that company goodbye.

yeah well apparently its just GMAC Commercial Mortgage, which is only a tiny part of GMAC so no one has to wet their panties just yet