Five-year credit-default swap spreads on General Motors Acceptance Corp. jumped wider last week on speculation parent General Motors may sell its controlling stake. The speculation came on top of a week of bad news for the auto maker, which also saw its stock take a tumble. "The name hanging over everyone's head is definitely GMAC. Same old, same old," said one credit derivatives trader.
Wednesday, GMAC protection swung 30 basis points wider to 475 bps after GM shares dropped to a 23-year low on news that Toyota Motor Corp. plans to boost production, potentially replacing GM as the world's biggest auto maker. Wachovia Corp. with Kohlberg Kravis Roberts & Co., JPMorgan Chase with J.S. Flowers & Co. and Cerberus Capital Management were named as potential bidders for GMAC, but traders worried GMAC--along with GM--could be forced to seek Chapter 11 bankruptcy protection if a sale falls through. "Every headline spooks the market," a trader said. "No one knows what's going on."
Fitch Ratings rates GMAC BB on evolving credit watch. The agency downgraded the name from BB plus Sept. 26 concurrent with its downgrade of GM, and lowered its credit watch from positive on Oct. 17, following GM's announcement it was considering "strategic alternatives." Moody's Investors Service rates it Ba1 on review with direction uncertain. Standard & Poor's rates it BB on credit watch with developing implications.
