Fitch cuts GMAC rating to "Restricted Default"

Fitch lowers GMAC rating to "Restricted Default" citing completion of bond exchange

NEW YORK (AP) -- Fitch Ratings said Thursday it downgraded its issuer default rating for GMAC LLC to "Restricted Default" from "CCC," citing the recent completion of the financing company's bond exchange.
The exchange covered about $28.8 billion of unsecured debt. Fitch considers the exchange, which closed on Dec. 26, as a distressed debt exchange. GMAC's debt that was not part of the exchange is not designated restricted default, the ratings service said.
The debt swap, originally announced in November, was part of a plan to obtain bank holding company status and become eligible for a piece of the federal government's $700 billion bank rescue plan.
On Christmas Eve, the Federal Reserve granted GMAC bank status and the Treasury Department subsequently gave the company $5 billion in assistance. The Treasury also said it would lend up to $1 billion to GM so that the automaker would be able to buy more equity from GMAC.

Analysts have speculated that if GMAC didn't obtain the funding it could have eventually failed.
Fitch said Thursday that GMAC could have violated a debt agreement if it did not get enough participation on the exchange.
Fitch also placed that same rating for GMAC, along with the issuer default rating of its home mortgage division, under review for possible upgrade.
Fitch said that with the bond exchange and financial help from both its ownership and the federal government, GMAC has strengthened its finances.

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