ResCap Downgraded After Exchange Offer

Fitch Ratings and Standard & Poor's Ratings Services downgraded the ratings of Residential Capital LLC, Minneapolis, following ResCap's announcement of an exchange offer for approximately $14 billion of unsecured bonds. Fitch downgraded the company's issuer default rating from BB-minus to C and its senior debt from B-plus to C, while S&P downgraded ResCap's long-term corporate credit rating from CCC-plus to CC. Both rating agencies said they were likely to lower their ratings further, to default status, upon the execution of the exchange offer. "ResCap's announced debt exchange offer is part of a plan to address the company's capital structure in light of current and expected future market conditions, by lengthening debt maturities and providing security to first-lien creditors," Fitch said. ".... At the completion of the exchange, Fitch would assign a post-default IDR and new issue-level ratings solely reflecting a prospective view of ResCap and its new capital structure." The rating agency said it "envisions" that the new IDR would fall in the single-B category. S&P said a successful exchange by ResCap "would extend debt maturities, providing needed relief, but the action illustrates the gravity of the company's financial position."