ResCap Seeks Further Separation From GMAC

Residential Capital Corp., a recently formed holding company for General Motors Acceptance Corp.'s residential mortgage lending business, is looking to increase separation from the GM side in the months ahead. Bruce Paradis, co-ceo, said the new company's primary intentions going forward are to continue to gain separation from GMAC, pay down debt, establish a track record in the public bond markets and bring spreads on its securities in line with those of its peers. ResCap was formed as a separate legal entity from GMAC this spring and now has investment grade ratings from the three major agencies and Dominion Bond Rating Service.

The company recently raised $4 billion through a private corporate debt offering in three parts, with the largest chunk coming in a five-year, 6.375% class. The buying base consisted of 80% domestic accounts 20% from foreign funds. Paradis noted although the company's parts have existed for 20 years, that this marked its first offering under the ResCap name is quite unique. He and Dave Applegate, also co-ceo, declined to discuss specifics on future debt offerings but said asset-backeds will also be a part of the mix. Although GM's credit troubles have gained widespread attention in the last six months or so, Paradis and Applegate said the plan to separate the residential funding business from the auto side has been in the works for nearly two years. Applegate said the company's operations had reached a critical mass to where it made sense to split from the GM side.