GMAC Mulling Possible Sale or Merger for ResCap

November 21, 2007 No Comments »

General Motor’s finance unit GMAC said today that it is exploring the potential sale of its mortgage unit Residential Capital LLC, but may also merge the ailing unit with the purchase a large lending institution.

GMAC, who has hired advisers to explore possible options, said it may purchase a “large non-U.S. mortgage lending institution” and combine it with ResCap’s local mortgage business.

“If it were successful in making such an acquisition, GMAC’s current intention would be to integrate ResCap’s local mortgage business with the acquired institution,” ResCap said in a statement.

It’s also possible that GMAC may sell off certain parts of ResCap, depending on what’s ultimately arranged.

GMAC is “closely monitoring” ResCap, and “believe we have the right plan in place to address it,” GMAC spokeswoman Gina Proia said.

Recent losses at ResCap totaling $1.6 billion in the third quarter forced the company to cut 25% of its work force, or roughly 3,000 employees, and bankruptcy fears began to surface.

ResCap also initiated a cash tender offer for up to $750 million of its debt securities to ensure it complies with its debt covenants.

GM revealed today that it has “no further obligation” to inject anymore capital into GMAC, which received a $1 billion infusion earlier this year.

ResCap includes a number of real estate finance companies, including GMAC Mortgage, GMAC-RFC, Ditech.com, wholesale mortgage lender Homecomings Financial, and others.

Shares of GM were up after the announcement, rising 99 cents, or 3.77%, to $27.27 in midday trading on Wall Street.

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