DBRS Comments on GMAC Inc’s Capital and Strategic Actions, Under Review Developing revised to Positive

DBRS has today revised the Under Review status on the ratings of GMAC Inc. (GMAC or the Company) and its related subsidiaries, including its CCC Issuer and Long-Term Debt ratings to Positive from Developing. Today’s rating action follows the U.S. Treasury’s announcement of capital actions in support of GMAC and GMAC’s announcement of certain mortgage operation related actions.

DBRS recognizes the significant progress that these actions represent in fortifying and de-risking GMAC’s balance sheet. Moreover, the mortgage related actions remove significant downward risk that was factored in the current rating. Accordingly, DBRS expects that, in the immediate term, the ratings will significantly benefit from these actions

The announced actions taken by the U.S. Treasury strengthens GMAC’s capital position. The U.S. Treasury will provide GMAC with a $3.79 billion capital infusion consisting of the purchase of $2.54 billion of trust preferred securities and $1.25 billion of mandatorily convertible preferred securities (MCPs). Moreover, Treasury will exchange $5.25 billion of its existing GMAC non-convertible preferred stock for newly-issued MCPs. Finally, Treasury will convert approximately $3.0 billion of MCPs into GMAC common equity, resulting in an ownership stake of 56%. As a result of these actions GMAC will achieve the capital buffer required of it under the Federal Reserve’s Supervisory Capital Assessment Program (SCAP). DBRS notes that the $3.79 billion capital infusion is less than the $5.6 billion originally anticipated by the Fed in May 2009, largely due to lower-than-anticipated losses stemming from the General Motors bankruptcy.

Subsequent to the Treasury’s announcement, GMAC announced certain actions related to its mortgage operations intended to de-risk the balance sheet and minimize future adverse effects on GMAC related to Residential Capital LLC (ResCap), its mortgage origination and servicing operation. The reclassification of certain mortgage-related assets that the Company intends to sell will result in a write-down of approximately $2.0 billion of mortgage assets at ResCap. These actions, inclusive of estimated operating losses for the period, required a total capital contribution to ResCap of approximately $2.7 billion in the form of mortgage loans acquired by GMAC from Ally Bank, GMAC debt forgiveness and cash. The ongoing support from GMAC will allow ResCap’s net worth to exceed the minimum level required to meet certain covenants.

DBRS will complete a full analysis of today’s announcements and will review the Company’s business and funding plans. DBRS anticipates completing its review in the next week and, as mentioned above, anticipates significant upward ratings migration.


Note:
All figures are in U.S. dollars unless otherwise noted.

The applicable methodology is Rating Auto Finance Companies Operating in the United States, which can be found on our website under methodologies.

This is a Corporate (Financial Institutions) rating.

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