MUMBAI (Thomson Financial) - Moody's Investors Service cuts its rating to
'Ca' from 'Caa1' on the senior debt of Residential Capital Llc., citing the
company's planned bond exchange.
Moody's added that all ratings remain under review for downgrade, reflecting
Residential Capital's inability to prove that it can produce the required
operating cash flow to service and ultimately repay these reduced obligations.
Residential Capital is a unit of GMAC Llc., which is 45-percent owned by
General Motors Corp.
The debt exchange by the company is a distressed exchange because the bonds
being offered in exchange for ResCap's existing debt is being offered at a
discount to par value and will have longer maturities, said Moody's, adding that
it considers distressed exchanges as defaults.
This exchange was undertaken to assist Residential Capital in avoiding a
payment default on its existing unsecured bond obligations, added Moody's.
Moody's added that the senior unsecured rating of GMAC LLC is at 'B2', under
review for downgrade.
The rating agency also affirmed at 'Caa1' the rating of ResCap's $1.2
billion bonds, as that they are not part of the exchange and that the company
intends to commence a cash tender for these bonds at par.
TFN.newsdesk@thomsonreuters.com
arc/ssa
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