General Motors sold a majority of its General Motors Acceptance Corp. unit to a group led by Cerberus Capital Management LP for $7.4 billion. The 51 percent stake in GMAC includes Cerberus, along with Citigroup Inc.’s private-equity group.
In a statement issued today, the finance arm will net about $14 billion over three years, including $10 billion by the time the sale is closed in the fourth quarter. According to Moody’s Investor Services, GMAC will likely retain its non-investment grade rating at closing.
Ending a five-month bidding war for GMAC, the sale brings GM CEO Rick Wagoner a step closer to reducing the cost of making auto loans by separating GMAC from its parent. Moody’s and other rating services cut GMAC’s credit rating, along with its parent’s, to junk last year after the automaker lost $10.6 billion. General Motors is trying to cut losses by selling assets, firing employees and offering buyouts to union workers.
As part of the agreement, Cerberus group and GM will enter a series of 10-year agreements that assure GMAC will continue to support GM auto sales. The automaker will have the option to buy back the automotive-finance operations for up to 10 years after the sale if GM has an investment-grade credit rating and meets other requirements.