GMAC's bonds traded up around three points to par on General Motors' announcement that it may sell a controlling stake in the finance subsidiary to a strategic partner. The sale is aimed at restoring GMAC's investment grade credit rating and renewing its access to the unsecured bond market. Its 7 3/4% '10 bonds traded up to par from 97 1/4. The spread on GMAC's credit default swaps also dropped 200 points to 300 after the announcement.
Last week, General Motors reported a $1.1 billion loss in the third quarter of 2005, compared with net income of $315 million in the same period last year. GM's global automotive operations reported a net loss of $1.6 billion. In contrast, GMAC reported third-quarter net income of $675 million, up from $620 million in third quarter of 2004. A spokeswoman at GMAC said the sale of a controlling stake would also help preserve the investment grade rating of its mortgage subsidiary, ResCap. "They are getting perilously close to non-investment grade," she said.