GM Finally Sells Big Stakes In Real Estate Lending Units
Cash-starved General Motors has finally unloaded controlling stakes in its residential and commercial mortgage banking empires, selling the storied franchises to two different investor groups.
In late March, a group that includes Kohlberg Kravis & Roberts and MBS inventor Lewis Ranieri, finally closed on its purchase of GMAC Commercial Holding, paying almost $9 billion for 78% of the company.
KKR, Mr. Ranieri's Five Mile Capital Partners and Goldman Sachs paid $1.5 billion in cash, while agreeing to repay $7.3 billion in intercompany loans to GMAC.
A few weeks later, Cerberus Capital Management and two partners inked a deal to buy 51% of General Motors Acceptance Corp., which controls the nation's fifth-largest residential mortgage banker.
CCM and its partners paid $14 billion for all of GMAC, which includes such industry brand names as GMAC Residential, GMAC-RFC, Homecomings and Ditech.
A spokesman for Cerberus told Mortgage Servicing News the investment fund's ownership of GMAC is for "the long term" and that there will be no breakup of the company or management changes. "We plan to grow the business," he said. Cerberus anticipates the sale will close by year-end.
CCM's partners in the transaction include financial services giant Citigroup and Japan's Aozora Bank. Oddly enough, the sale places GMAC's residential empire in the position of being owned by competitors. (Its residential business is housed under the holding company, Residential Capital Corp.)
Citigroup owns Citigroup Mortgage and subprime lender CitiFinancial. Cerberus owns a controlling interest in Aegis Mortgage, a top 20 ranked nonconforming lender based in Houston.
Counted as one, Residential Capital Corp. ranked fifth in originations last year with $170 billion, according to the Annual Data Report. Among servicers it ranks sixth with $389 billion in housing receivables.
Cerberus is the lead investor in the deal with majority exposure, said the spokesman. He declined, however, to give precise details on ownership percentages.
Besides mortgages, GMAC controls other financial services assets, including auto finance, credit cards and insurance. It also owns a U.K. division that purchases and funds residential mortgages in Europe.
GM, which is facing possible bankruptcy, is trying to raise cash and restore its debt ratings and that of GMAC.
Rick Wagoner, GM's chairman and chief executive officer, said the sale will preserve "the mutually beneficial relationship between GM and GMAC." After the sale was announced, GMAC's credit ratings did not improve, but Cerberus expects that in time they will.
As for GMACCM, GM originally had hoped to sell 60% of the commercial lender/servicer but as the automaker's financial problems worsened, it unloaded even more of the company. (Sale negotiations were ongoing for a year.)
GM's financial woes - which include poor auto sales and huge pension fund obligations - have hurt its debt ratings and that of its mortgage affiliates. Sources said legal concerns over a possible bankruptcy by GM delayed the deal at several points.
Upon closing, GMACCH, the parent of GMAC Commercial, Horsham, Pa., changed its name to Capmark Financial Group.
According to figures compiled by the MSN, GMAC Commercial is the nation's largest commercial mortgage banker, with $247 billion in receivables at year-end. It also ranks among the top funders of multifamily loans in the U.S. General Motors will retain 22% of Capmark.
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