General Motors – which on Monday announced the sale of 51% of its auto financing arm GMAC to Cerberus Capital Management – should have made getting an investment-grade rating for GMAC mandatory, according to UBS, The Associated Press reported.

“To us, the reason to sell a controlling stake in GMAC was to improve its prospects,” UBS analyst Rob Hinchliffe reportedly wrote in a Tuesday research note.

“Without an investment grade credit rating, GMAC’s access to competitive funds deteriorated to the point where it was shrinking. We’re not sure that this Cerberus-led consortium improves GMAC’s prospects.”

AP noted that securing an investment-grade rating would grant GM better access to capital markets but three rating agencies – Standard & Poor’s, Moody’s, and Fitch – all reiterated that GMAC would remain junk-rated. GM expects to receive $US14.1bn cash from the sale.

At January’s Detroit motor Show, GM said a GMAC partner would help secure an investment-grade rating, expand balance sheet capacity, improve competitive funding, and “generate operational synergies,” Hinchliffe said, according to The Associated Press. Cerberus falls short of the kind of strategic partner GM says it was looking for.

How well do you really know your competitors?

Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.

Company Profile – free sample

Thank you!

Your download email will arrive shortly

Not ready to buy yet? Download a free sample

We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form

By GlobalData
Visit our Privacy Policy for more information about our services, how we may use, process and share your personal data, including information of your rights in respect of your personal data and how you can unsubscribe from future marketing communications. Our services are intended for corporate subscribers and you warrant that the email address submitted is your corporate email address.

AP noted that GM’s announcement states the sale should close in the fourth quarter and that GM will not get dividends from GMAC for three years. So for now, Hinchliffe reportedly maintains a “reduce” rating and price target of $18 on General Motors, choosing to focus on near-term fundamentals like March sales and inventory build.