GMAC loans $635M to its mortgage unit

David Mildenberg / Bloomberg News

GMAC LLC, the lender partially owned by General Motors Corp., agreed to loan as much as $750 million to its residential mortgage unit as it seeks to sell a business that finances vacation resorts.

Residential Capital LLC borrowed $635 million under the agreement Thursday, the Minneapolis-based company said Friday in a regulatory filing. GMAC Chief Executive Officer Eric Feldstein has cited the resort operation as one of the company’s best performing businesses.

Pressure on Detroit-based GMAC increased Friday after Standard & Poor’s downgraded its credit ratings and those of the ResCap home-lending unit because of difficulty in funding loans. GMAC, controlled by buyout firm Cerberus Capital Management LP, said this week it will shut three-quarters of its North American auto-financing offices this year and cut 930 workers after a $2.3 billion loss last year.

"It’s going to be difficult for them to sell anything," said Bradley Rubin, a credit analyst at BNP Paribas in New York. "The appetite to buy real estate assets is limited at best."

S&P analysts wrote today that GM and Cerberus support for GMAC "must be materially less than it was several quarters ago." GMAC’s counterparty credit rating was cut to B+/C from BB+/B. The rating on ResCap was lowered to B/C from BB+/B, Standard & Poor’s said in a statement today.

"We’re extremely disappointed in Standard & Poor’s action today," GMAC spokeswoman Gina Proia said in an interview. "We remain committed to taking the steps needed to improve our business."

GMAC previously disclosed it may sell parts of ResCap, which posted a $4.3 billion loss last year. ResCap’s units include the DiTech and Homecomings Financial mortgage lending businesses. It doesn’t disclose the finances of its resort finance business, which funds development of time shares and is part of the Business Capital Group division, Proia said.

Time share sales in the United States were $10 billion in 2006, a 16 percent increase over 2005, with 8.5 million units sold, according to the American Resort Development Association.