GMAC able to meet debt maturities without more unsecured debt, will be opportunistic, CFO says

By Jennifer Lanning Drey

Portland, Ore., May 3 - GMAC Financial Services' liquidity position, funding strategy and transactions executed so far this year have given the company confidence in its ability to meet its debt maturities "well into the future" without requiring the issuance of additional unsecured debt, James Mackey, GMAC's interim chief financial officer, said Monday during its first-quarter earnings conference call.

"This can allow GMAC to be opportunistic with its plans to raise unsecured funding," Mackey said.

However, the company will remain diligent with regard to bolstering liquidity and addressing upcoming maturities on a prudent basis and based on market conditions, he said.

GMAC has issued more than $5 billion of unsecured debt so far this year.

The company had $14.7 billion of consolidated cash and cash equivalents at March 31. The figure included $725 million at Residential Capital LLC (ResCap), $4.4 billion at Ally Bank, excluding certain intercompany deposits, and $626 million at the insurance business.

GMAC's funding strategy is based on a two-pronged approach that looks to use cost-efficient funding at its banking entities while maintaining consistent, diversified access to the capital markets, Mackey said.

Return to profit

GMAC posted net income of $162 million for the first quarter of 2010, marking its first operating profit since the second quarter of 2007, Michael Carpenter, its chief executive officer, said during the call.

The figure compared to a net loss of $675 million for the same period of 2009.

All four of GMAC's operating segments were profitable in the first quarter, Mackey noted.

GMAC also announced Monday that the company will be re-branded as Ally Financial on May 10.

No capital needed by ResCap

Also during the call, Carpenter noted that ResCap did not require any additional capital liquidity support in the first quarter, a trend the company hopes will continue.

"One of our key priorities for ResCap is to now support itself on a stand-alone basis without incremental capital or liquidity from GMAC above current levels," Mackey said.

That goal will be achieved through measures including asset sales, portfolio wind-downs, the capital markets and third-party banking transactions, he said.

The company is in the final stages of establishing new third-party facilities at ResCap, he also said.

Additionally, ResCap has restructured its servicer advance funding facility and sold $508 million of term ABS notes, Mackey noted.

"We know there's more work to do to resolve the challenges caused by legacy issues, but we are encouraged by the progress year to date, he said.

ResCap is a New York-based real estate finance company primarily focused on residential real estate markets in the United States, Canada, Europe, Latin America and Australia.

GMAC is an automotive financial services company.

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