Wednesday, August 02, 2006

GMAC now an LLC in step toward closing stake sale

Wednesday, July 26, 2006
GMAC now an LLC in step toward closing stake sale
Associated Press

PHILADELPHIA -- General Motors Acceptance Corp. has been converted to a limited liability corporation as part of steps by General Motors Corp. toward closing the sale of a majority stake in the giant finance operation.

On a conference call with investors Wednesday, GMAC chief financial officer Sanjiv Khattri characterized the change to an LLC as a "small but important step" toward completing the 51 percent GMAC stake sale to a consortium led by Cerberus Capital Management.

The conversion to an LLC was largely a "symbolic step," Khattri added, and the company has not realized any savings as a result.

The GMAC deal is on track to close in the fourth quarter of this year, said GM chief financial officer Fritz Henderson. "A lot of work is under way" to close the deal on time, Henderson said.

A number of other closing conditions for the sale have already been met. Earlier this month, the quasi-government pension insurance agency, the Pension Benefit Guaranty Corp., approved the sale and agreed not to place any conditions on the use of proceeds. Cerberus has also been granted Federal Trade Commission antitrust approval for the deal.

Earlier Wednesday, Detroit-based GMAC reported record second-quarter income of $898 million, compared with $817 million a year ago. Strength in GMAC's residential mortgage business offset lower earnings from automotive financing.

GMAC must work to expand its auto finance business beyond just GM vehicles, Khattri said, as well as push harder into used car financing.

GMAC had $22.7 billion in cash at the end of the quarter and more than $50 billion in untapped bank lines. The company recently renewed two syndicated bank loans totaling $21 billion.

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