In an
effort to firm up its finanaces, General Motors announced today that it has sold a majority interest in GMAC Commercial
Holdings Corp. from the company's financing division, GMAC (General Motors Acceptance Corp.).
Word is that GM sold 78-percent of its equity in its Commercial Holding Corp. in exchange for more than $1.5 billion USD -- an increase over the targeted 60-percent interest. More importantly, GMAC Commercial Holding, the company's real estate financing arm will repay around $7.3 billion in intercompany advances to GMAC when the deal is consummated - bringing the value of the transaction to nearly $9 billion.
GMAC Commercial Holding will come to be known as Capmark Financial Group Inc., a decision reached by the investment group, which includes Kohlberg Kravis Roberts & Co., Goldman Sachs Capital Partners, and Five Mile Capital Partners.
(click on through to the jump for the GM-provided press release with full details).
[Source: Associated Press via Fox News, General Motors via PRNewswire]
(Top tip, Dave J!)
GMAC, the wholly-owned financial services subsidiary of General Motors Corporation (NYSE: GM - News), sold 78 percent of its equity in GMACCH, up from the previously announced 60 percent target, in exchange for more than $1.5 billion in cash. At the closing, GMACCH also repaid to GMAC approximately $7.3 billion of inter-company loans, bringing GMAC's total cash proceeds from the transaction to almost $9 billion.
GMACCH, a leader in real estate finance, investments and services announced that it has changed its name to Capmark Financial Group Inc. (Capmark). The name change will be fully implemented in the second quarter of this year.
Simultaneous with the equity interest sale, Capmark closed with a syndicate of banks on a $10.75 billion loan facility that will provide the company with a solid intermediate and long-term debt funding base.
"This is an exciting time for our company, and we have a great deal to celebrate," said Capmark Chief Executive Officer Robert D. Feller. "With investment-grade ratings from the three primary rating agencies and enhanced access to the capital markets, Capmark is poised to fully realize the opportunities that exist for each of its businesses."
GMAC Chairman Eric A. Feldstein said, "GMAC is optimistic about the growth prospects for Capmark. With improved access to cost-efficient funding, this commercial mortgage business should continue to thrive. We are expecting strong returns on the significant investment that GMAC will retain in this business. At the same time, this transaction will enable GMAC to redeploy a significant amount of capital -- almost $9 billion -- to other critical areas of our business."
Concurrent with the closing of the sale, the percentage of ownership interest of both the investor group and GMAC has been reduced proportionately by the sale of shares to members of Capmark's management team, who have acquired an equity stake of approximately four percent. With the management team's investment, the investor group holds a majority interest of approximately 75 percent, while GMAC retains a common equity stake of approximately 21 percent. GMAC also will invest an additional $250 million in Capmark trust preferred stock.
Capmark's board of directors will be led by newly appointed independent Chairman Dennis Dammerman, a former vice chairman of General Electric and chairman and chief executive officer of GE Capital Corp. GMAC will hold two seats on Capmark's 15-member board, which includes three independent directors.
"I am very pleased to serve as chairman of the board of directors of Capmark," said Dammerman. "With increased access to capital, a new name and investment-grade ratings, the company can build on its many strengths, drive profitability and enhance the value of the enterprise."
KKR, Five Mile Capital Partners and Goldman Sachs Capital Partners said in a joint statement, "As a global leader in each of its businesses, Capmark is very well positioned to begin its next chapter as a standalone company. We look forward to working with the management team to realize the company's full potential by making use of the wide range of funding options now available to Capmark."
About Capmark:
Capmark Financial Group Inc. (Capmark) is an industry leader in real estate finance, investments and services. Capmark's real estate lending and origination platform has access to multiple capital sources. The company is a direct lender, a correspondent for life insurance companies and pension funds and one of the leading approved lenders for FHA, Fannie Mae and Freddie Mac. In 2005, Capmark's originations were $29.9 billion.
Capmark's funds and investment management platform is a highly respected manager of equity real estate and mortgage-related investments in the public and private markets with $10.8 billion in investments under management and supervision.
With a portfolio of approximately $276 billion, Capmark is one of the industry's leading loan servicers.
The diverse real estate finance, investments and services company has more than 100 offices and operations in North American, Asia and Europe. For more information, visit http://www.gmaccm.com .
About KKR:
KKR is one of the world's oldest and most experienced private equity firms specializing in management buyouts. Founded in 1976, it has offices in New York, Menlo Park, Calif., London, Paris, Hong Kong and Tokyo. Over the past 30 years, KKR has invested in more than 140 transactions with a total value of US$185 billion. For more information, please visit http://www.kkr.com .
About Five Mile Capital Partners:
Five Mile Capital Partners ("FMCP") is an alternative investment management firm established in 2003 with equity capital under management of $800 million. The firm was founded by five professionals, each with over 25 years of experience in all aspects of mortgage, real estate and asset-backed finance. The partners both collectively and individually have built a number of leading financial franchises and participated in creating some of the key innovations in mortgage and real estate capital markets. For more information, visit http://www.fivemilecapital.com .
About Goldman Sachs:
Founded in 1869, Goldman Sachs is one of the oldest and largest investment banking firms. Goldman Sachs is also a global leader in private corporate equity and mezzanine investing. Established in 1991, the GS Capital Partners Funds are part of the firm's Principal Investment Area in the Merchant Banking Division. Goldman Sachs' Principal Investment Area has formed 11 investment vehicles aggregating $26 billion of capital to date. With $8.5 billion in committed capital, GS Capital Partners V is the current primary investment vehicle for Goldman Sachs to make privately negotiated equity investments.
About GMAC:
General Motors Acceptance Corporation and its subsidiaries, operating under the umbrella GMAC Financial Services,
provide automotive financing, commercial finance, insurance and mortgage products, and real estate services, and have a
presence in more than 40 nations. A wholly owned subsidiary of General Motors since 1919, GMAC has extended more than
$1.4 trillion in credit to finance more than 162 million vehicles.
Source: General Motors Corporation
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Reader Comments (Page 1 of 1)
Bonita @ Mar 23rd 2006 11:37AM
GM will probably use all of that cash to re-instate their classic cars:
Chevy Vega
Pontiac Fiero
Cadillac V8-6-4
Oldsmobile
puzzled @ Mar 23rd 2006 11:52AM
I thought this was the only way that Ford and GM were making money was through their finance arms?? Taking that away seems to me would eventually be the destruction of GM.. This sale would only prolong that.
I could be wrong.
Richard Warren @ Mar 23rd 2006 11:57AM
Gives them cash now, long term, bad move, selling off the cash cow is never a great idea.
rw @ Mar 23rd 2006 12:09PM
This is really a bad thing. GMAC has always been the dealers friend. God what a mess. But if they can get their credit rating up we can send more S and A paper to GMAC. But they sure bought deep. A lot of people who would walk out with a 20% would get 8 or 9 % loan. Going to interesting for the credit challanged. I can only hope they continue their same buy policy. If not the customer with less than great credit, the 475 to 580, are going to really feel the pain.
ANR @ Mar 23rd 2006 12:13PM
No, no, they're only selling the division that deals with Real Estate, not the automobile financing part.
not bonita @ Mar 23rd 2006 12:18PM
Bonita,
Don't be such an Asshole!
rwcmick @ Mar 23rd 2006 12:19PM
correct, this deal was only for the mortgage division (GMAC Commercial Holding Corp). however, gm still plans to sell a controlling interest in its overall finance business.
--------------------------------
http://www.allcarsallthetime.com
klaatu @ Mar 23rd 2006 12:28PM
I thought I read that the mortgage business was just about the only thing GM could make any money on in North America, and without it, the losses from automotive would have sunk them years ago?!
Paul Murray @ Mar 23rd 2006 1:07PM
Yep, that's a misleading headline, all right. The body is accurate, but the head is wrong.
Jaimie B @ Mar 23rd 2006 1:37PM
GM reminds me of those down-and-out folks that hang out at Money Mart outlets or pawn shops. Selling everything they got to support their addiction. Addiction in their case is building crappy cars.
Rastus @ Mar 23rd 2006 4:16PM
$24 million dollars every day...we can be like they are...baby take my hand...
...don't Fear the Reaper, there GM.
Just promise us all that we won't see you in the afterlife, ok? If I see Elvis driving a Celebrity EuroTrash...ooops, I mean a EuroSport in the afterlife, I will purposely demand to be sent to hell.
Phil @ Mar 23rd 2006 4:17PM
This is a great move because $4 Billion can be 'borrowed' from GMAC to finance new global architectures and engine technology they've been waiting to start on.
No more waiting!
Rastus @ Mar 23rd 2006 4:27PM
Look, Mama...I's got me one of those new "EURO"sport Chevys! I've been working hard for 3 years down as the filling station all for this glorious day. I never thought I'd see the day where I get to drive one of those European sport sedans...but the Good Lord has blessed me.
Praise Be, Lord Jesus Savior!!
I hope the previous owner cleaned out the malt liquor bottles from under the seat.
http://cgi.ebay.com/ebaymotors/1986-1987-Chevrolet-Celebrity_W0QQitemZ4618293418QQcategoryZ40019QQrdZ1QQcmdZViewItem
Count of Monte Christo @ Mar 23rd 2006 4:35PM
While getting rid of a cash cow is bad, GM had little choice. GM's dismal credit rating was effecting GMAC. GMAC was getting pulled down by GM. GMAC's ability to access money at good rates was being compromised due to GM's financials.
robino @ Mar 23rd 2006 5:55PM
To be specific, they have sold that portion of GMAC that has nothing to do with financing their cars. Perhaps the only division of GMAC that is worth anything. I wouldn't want to be holding paper on a bunch of cars depreciating faster than their owners can pay them off because the manufacturer is going down the tube. Why, I may be tempted to take the car back to the dealer - you know, the one with the bankruptcy papers taped to the inside of the front door - and let them take care of it.
iQuack @ Mar 23rd 2006 6:18PM
Probably something GM had to do, but I think I'd rather be in the banking business than in auto manufacturing.
I own some GM stock (including Delphi which will be a dead loss) and shares of Wells Fargo, too.
Guess which has done better.
Matt Keegan @ Mar 24th 2006 11:39AM
Yes, the headline of this posting is completely misleading. The mortgage side of the house has been sold which makes perfect sense. Good to get out of it before changes in the housing market impact its worth.
As far as the automotive end goes, it makes sense to sell off a portion of it as well. GM will still have a source for funding and, at the same time, get some much needed cash in their pocket.
Boy, some of you guys are hyper negative...you depress me!
All World Automotive @ Mar 25th 2006 7:33AM
Kiss this company good bye. What a bunch of idiots! Only solid revenue source they have and they sell it. The guys running this company are only in it for them selves. They could care less about the future of GM or our country.
john longanecker @ May 2nd 2006 2:52PM
Sir: Ford and Daimler Chrysler now own a great portion of Ballard Power Systems (CANADA)/ What affiliation does GM have with a hydrogen Fuel Cell Firm and where??????? I am an invester in Ballard and also own a large GMAC Bond. By your announcing your advances to 'H' run cars, you get people's interest which spurs investment. On what page and in what chapter are you on regarding 'Hydrogen' that will run your vehicles? Please respond///////////
Sincerely yours, JOHN LONGANECKER PHONE 717 677 9698