New GMAC Unit Given Negative Outlook

Residential Capital Corp., the newly formed holding company for Residential Funding Corp. and GMAC Mortgage Corp., has been assigned a negative rating outlook by Fitch Ratings.In addition, Fitch upgraded the long-term and short-term ratings of GMAC Bank from BBB-minus to BBB and F3 to F2, respectively, and assigned the bank a negative rating outlook. Fitch said ResCap was created by General Motors Acceptance Corp. (which retains 100% ownership) to provide more operational and financial flexibility and to improve the liquidity of the residential mortgage business. The rating agency said approximately $8.2 billion of GMAC's intercompany debt remained outstanding as of March 31, of which $5.0 billion will be converted to long-term subordinated debt. Fitch said it expects that "a portion of proceeds raised through any ResCap corporate debt issuance may be used to repay intercompany debt to GMAC." The credit ratings of Detroit-based GMAC were recently downgraded to "junk" status due to financial woes at its automotive corporate parent.