General Motors Acceptance Corporation (GMAC) has said in a regulatory filing a it may be unable to sell a majority stake of its operations, The Associated Press (AP) reported.
Go deeper with GlobalData
General Motors finance arm GMAC said in its annual report that “we are uncertain at this time if any transaction” will occur for GMAC or any of its subsidiaries, including residential mortgage arm Residential Capital Corp, the news agency said.
AP noted that GMAC management had hoped a new parent for the company would bring investment-grade credit ratings to the finance business, which was slashed to junk status last year alongside its sliding automotive parent – it was those sub-par ratings that caused GM to consider the sale, which GM chief executive Rick Wagoner announced in October.
GM has also it would restate financial results for GMAC from 2003 to the end of the third quarter of 2005. The report said the restatement relates to the improper classification and presentation of cash flows for certain mortgage loans.
However, AP added, the company said the restatement won’t affect previously reported total cash and cash equivalents and it would have no effect on GMAC’s income. In an annual report for GMAC, the company warned that further credit downgrades “jeopardise our ability to continue operations.”
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.
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 GlobalDataGMAC noted in its filing that if the stake sale doesn’t go through, GMAC faces numerous risks to its business, The Associated Press said.
Credit ratings agencies have said repeatedly that they will probably knock GMAC’s ratings closer to those of its auto maker parent if the finance company isn’t divested, and GM is burdened with middling junk ratings. Those lower ratings would dramatically raise the cost of funding for GMAC, as well as severely impede its access to capital, it added.
If no sale occurs, GMAC reportedly said, “our access to capital may be seriously constrained, as most unsecured funding sources may decline, including bank funding.”
The cost of secured funding may also ramp up if no sale goes through, the filing added, leading to a reduction in liquidity for certain asset classes.
