Citi Ups GMAC's Credit Line

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Includes: C, GM
by: Judith Levy

GMAC LLC, the financing arm of General Motors, has received an asset-backed loan facility of up to $21.4 billion from Citigroup. The credit line will be used "to provide funding for U.S. automobile related assets, mortgage assets and other assets across GMAC and its subsidiaries," GMAC said in a federal filing. The credit line's one-year term is shorter than that of the $10 billion line it is replacing, but it is renewable. As of June 30, GMAC had $6.5 billion in asset-backed commercial paper secured in part by mortgages. "With the current global credit market, the company decided this funding was prudent," said GMAC spokeswoman Gina Proia. "This gives us additional liquidity. It bolsters our financial flexibility." GMAC's profits were hit this year when its Residential Capital LLC unit (ResCap), faced with high default levels among subprime borrowers, posted an H1 loss of $1.15 billion. The company will be able to use $14.4 billion once the line is finalized and another $7 billion under certain conditions. Last year, GM sold a 51% stake in GMAC to a private equity group led by Cerberus Capital Management, which is also buying Chrysler.

Sources: Wall Street Journal, Bloomberg
Commentary: GM Restructuring Positives May Outweigh Rescap RisksResCap Mortgage Unit Coming Back to Haunt GMGM and the GMAC Sale: Devil's In the Details
Stocks/ETFs to watch: GM, GKM, GMA, GJM, GOM, C.
Earnings call transcript: General Motors Q4 2006

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