Fitch Inc. announced Monday that it expects to assign an investment-grade rating to the debt of General Motors Acceptance Corp.'s commercial mortgage subsidiary after a majority stake in the unit is sold.
The announcement was undoubtedly reassuring to GMAC. It is spinning off the unit, GMAC Commercial Holding Corp. of Horsham, Pa., in hopes of getting it a rating high enough to help fund balance-sheet growth, which has stagnated since the ratings for both dropped to junk level.
The ratings agency said it expects to assign a BBB rating to GMAC Commercial's senior unsecured debt. That is three notches better than its current rating, which is the same as GMAC's.
Christopher D. Wolfe, a senior director of Fitch's financial institution group, said that the new rating is no longer tied to GMAC's.
"GMAC will no longer have a controlling interest" in the commercial mortgage company, he said. "There's really no good reason to link the ratings to GMAC anymore."
The General Motors Corp. subsidiary agreed in August to sell a 60% stake in GMAC Commercial to a group including Kohlberg Kravis Roberts & Co., Goldman Sachs Capital Partners, and Five Mile Capital Partners.
How much they would pay was not disclosed then, but Bloomberg News reported Monday that the group is seeking $6 billion in loans to help fund the purchase. The sale is expected to close by yearend.
General Motors said last month that it is considering selling a controlling interest in GMAC to help its financial services arm gain an investment-grade rating. At the same time, GMAC said it was evaluating "strategic and structural alternatives" to help its residential mortgage business, Residential Capital Corp., retain its investment-grade ratings. Joanne Krell, a GMAC spokeswoman, said Monday that there was no update on plans for GMAC or ResCap.
Also Monday, ProAssurance Corp. announced that it would sell Meemic Insurance Co., its personal lines insurance unit, to GMAC's Motors Insurance Corp.
GMAC will pay $327 million in cash for Meemic, about $73 million of whose capital ProAssurance would retain. The deal is expected to close in the first quarter. GMAC expects to retain Meemic's staff and management.
ProAssurance is based in Birmingham, Ala. Meemic, of Auburn Hills, Mich., offers primarily auto and homeowners insurance to educational employees in Michigan and Wisconsin.
