Fitch Ratings considers GM rating split

| April 27, 2005 | 0 Comments
Fitch Ratings considers GM rating split

Fitch Ratings is looking at the possibility of separating the credit ratings of General Motors and its finance division GMAC.

Fitch and other ratings services all currently rate General Motors BBB-, the lowest investment level, and assign it a negative outlook. This suggests that the company could find itself in the high-yield market.

If this were to occur, some funds that are not allowed to hold bonds that are not rated investment grade would have to sell off their shares in GM.

But if Fitch were to separate the ratings of the parent and its financing division, GMAC would likely remain at investment grade even if GM’s rating were reduced.

GMAC is currently rated BBB- by Standard & Poor and Fitch and at Baa2 by Moody’s. While the S&P and Fitch ratings are the lowest investment grade rating, the Moody’s rating is 2 levels above speculative grade. S&P has said it would not separate the ratings of the two entities.

Additionally, GMAC is currently looking at making its mortgage business into a separate company. This move, if pursued, would make the division of GM’s and GMAC’s ratings less likely.

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