GMAC raised $7.1 billion selling retail auto loans as securities

Article by Christian A., on August 27, 2010

Indicating that GMAC Financial Services has improved its access to capital in the past six months, it was reported this week that it is raising almost $1 billion selling retail auto loans as securities. GMAC has had to rely on cash infusions from the US Treasury Department to stay afloat during the credit crisis.

Treasury invested $17.2 billion and now owns 56% of GMAC. With the completion of the latest transaction, GMAC would have already raised $7.1 billion since September with the sale of securities and bonds.

The sale that occurred this week stands for the first time that GMAC unit Ally Bank has sold securities outside of a government-sponsored program.

The three previous transactions in September, November and February by Ally Bank used a federal program intended to free up credit markets by giving financial aid to investors. Last week, GMAC raised $1.5 billion through a bond issue, its second this year.

Last February, GMAC raised $2 billion through a bond issue, which is notably the first time that the lender had access to the capital markets since May 2007.

In an interview after the February transaction, GMAC CEO Michael Carpenter said that the bond issue was a major step toward profitability. He revealed that some recent ratings upgrades have lowered GMAC's cost of capital. [via autonews]

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