GM in talks to sell commercial mortgage lender in deal that could bring it $1B.

from cnnfn.com

GM to sell mortgage unit?

Report: GM in talks to sell commercial mortgage lender in deal that could bring it $1B.

March 23, 2005: 8:03 AM EST

NEW YORK (CNN/Money) - General Motors Corp. is in talks to sell its commercial mortgage unit in a deal that could bring the embattled auto maker $1 billion or more, according to a published report.

The Wall Street Journal reported Wednesday that GM (Research) is interested in keeping a significant stake in the business even after a sale. The unit collects payments on more than $247 billion in mortgages on properties ranging from health care facilities to golf courses, according to the paper.

"There was some interest expressed on the part of multiple parties to invest in our commercial-mortgage business. We're in discussions with those parties," GM spokeswoman Toni Simonetti told the Journal. "We are amenable to equity partners, but GMAC's intention is to maintain a significant equity interest in this business."

The Journal said GM had been close to selling the unit last year to Deutsche Bank AG, but that deal was never completed and GM expressed a willingness at that time to hang onto the Philadelphia-based unit.

But GM is now looking to improve its cost structure and stem losses. Proceeds from a sale could go to debt reduction and help it avoid a downgrade of more than $300 billion in debt.

Last week the company announced it expected to lose $1.50 a share in the current quarter, rather than break even or post a narrow profit as previously expected.

GMAC, the company's overall finance unit, has been an important driver of profits for GM in recent years, producing more earnings than its core auto operations. GM lost $194 million on its auto operations in 2004 before income taxes, equity income and minority interests, while GMAC earned $803 million on that basis.

This is postive news. GM needs to (1) financially bolster its core automotive business and GM also needs to (2) eliminate its exposure to the mortgage market. The potential sale of GMAC accomplishes both goals.

Ditech?

This is postive news. GM needs to (1) financially bolster its core automotive business and GM also needs to (2) eliminate its exposure to the mortgage market. The potential sale of GMAC accomplishes both goals.
This only talks about their commercial lending side. I don't think they're selling their residential lending business.

I don't see this as being good. Despite what could be considered enormous debt financing is where GM is making a lot of its money.

Not Good!

Not Good!
Hey, got the caps lock buttom fixed :thumb:

Hey, got the caps lock buttom fixed :thumb:
Yes I did! If I was half as good with computers as I am with cars I might be dangerous :cool:

I don't see this as being good. Despite what could be considered enormous debt financing is where GM is making a lot of its money.

They lost a lot of money this year. They're probably looking for quick means of making some of that money back up.

I still can't believe they handed Fiat 2 billion dollars and got sh!t. That' s a lot of money for nothing.

$1b? thats not even 1/5th of what GM sepends on healthcare in a year...

As I understand it they're considering selling half of their Commercial Lending Unit to net around a billion dollars. They'll keep the consumer (mortgage) & auto divisions.

When you're borrowing money to lend money, and your bonds are it risk of going to "junk" status, selling part of a division to reduce the risk may save a lot of finance costs for the whole of GM.

IMO a smart move.

When you're borrowing money to lend money, and your bonds are it risk of going to "junk" status, selling part of a division to reduce the risk may save a lot of finance costs for the whole of GM.

It's really GM's core auto business that is flirting with junk bond status. If GMAC was to be separated, it would have a much better rating on its own. In fact, GM has already contemplated making this move.