Wednesday, March 23, 2005

GM in Talks to Sell Part of Mortgage Unit

NEW YORK (Reuters) - General Motors Corp. (GM), is in talks to sell a stake in its GMAC Commercial Mortgage unit, a spokeswoman for the automaker said on Wednesday.

The mortgage unit originates and services mortgages in a variety of business sectors and generated profits of $204 million last year. It is part of GM's GMAC finance unit.

GM started negotiations after interested investors came forward, the spokeswoman, Toni Simonetti said, adding that the automaker's finance unit does not need to raise cash.

``We're amenable to discussing a potential investment,'' she said. ``GMAC has plenty of cash, $23 billion in cash. They don't need to raise cash.''

GM intends to keep a ``significant equity interest'' in the unit, Simonetti said. She declined to identify the parties GM was talking to, or a sale price.

GM said last week that it expects its overall profit this year to be as much as 80 percent below its prior forecast due to weak U.S. sales and competition from foreign automakers. The company also is facing a possible credit downgrade to ``junk'' status by two ratings agencies.

GM had reached a tentative agreement to sell the commercial mortgage business to Deutsche Bank AG for about $1 billion, sources told Reuters in September 2003. That deal was expected to close at the end of November. But GM shelved plans to sell the business in December 2003 because it didn't like terms offered by suitors, GM said. The company has never revealed who they were planning to sell it to.

Selling the commercial mortgage operations would provide a small lift to GMAC's liquidity, and could give the commercial mortgage business a higher debt rating if the operation is structured to be separate from GM and GMAC, Mark Oline, managing director of corporate finance with Fitch Ratings said on Wednesday.

Fitch and Standard & Poor's ratings agencies warned last week that GM's debt ratings could be cut to ``junk'' status at any time.

``In all likelihood, this would not impact GM's ratings,'' Oline said of a potential sale of the commercial mortgage unit.

Last year, GMAC churned most of the profits for GM, earning $2.9 billion versus profits of $1.2 billion for GM's automotive operations. (Writing and additional reporting by Detroit newsroom, 313-967-1900)

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