Standard & Poor’s on Monday said it may still change its ratings on General Motors Acceptance, citing news that a controlling stake of the GM unit is being sold to an investment consortium, according to Reuters.
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If the transaction is completed as proposed, GMAC’s ratings would likely be raised by one notch to “BB-plus,” the highest junk rating, S&P reportedly said. Separately, S&P said GM’s ratings remain on review for a downgrade and could be cut at any time because of events at supplier and former unit Delphi Corp. S&P rates GM “B,” five steps below investment grade.
Separately, the news agency reported that two other ratings agencies warned, also on Monday, that GMAC’s links with parent GM could hamper the finance unit’s attempts to shed a “junk” credit rating, despite the sale of the 51% stake by GM.
Reuters noted that GM has been trying to sell a majority stake in GMAC since October, and had said it hoped such a sale would restore the unit to investment grade, giving it access to cheaper funding.
However, Moody’s Investors Service reportedly said it might still cut its Ba1 rating on GMAC and said it thought maintaining the rating, one level below investment grade, would be the “best-case rating outcome” at the close of the sale.
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By GlobalDataAccording to the report, Moody’s said GM’s credit profile would need to stabilise or improve before GMAC could move out of “junk” status, and it did not view the consortium as a “strategic investor” that could provide external support for the rating.
In a statement cited by Reuters, Moody’s said it expected GMAC’s business relationship with GM would “continue to be the cornerstone of its business model”, so GMAC would still be exposed, both directly and indirectly, to conditions at GM.
“In Moody’s view, therefore, it is unlikely that GMAC’s ratings could rise to the investment grade level until GM’s credit profile stabilises or even improves,” the agency said, according to Reuters.
In contrast, the report added, Fitch Ratings said it could raise its BB issuer default rating on GMAC, which is two notches below investment grade, but warned that GM brought extra risks.
“While in many respects, GMAC possesses characteristics of an investment grade company, its ongoing business relationship with GM brings with it an element of risk not generally evident with investment grade issuers,” Fitch said in a statement cited by Reuters.
“However, Fitch would expect that GMAC’s capital, liquidity, and funding plans will directly incorporate GM’s weakened financial condition and the structural challenges facing what is in effect GMAC’s largest customer.”
