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S&P cuts Residential Capital, affirms GMAC
Standard & Poor's said it lowered the long-term counterparty credit rating on Residential Capital LLC to BB+/B from BBB-/A-3 and removed its ratings from CreditWatch, where they were placed with negative implications on Oct. 17. The downgrade follows a third-quarter net loss of $2.3 billion.
In a related move, S&P affirmed GMAC LLC's BB+/B long-term counterparty credit rating and removed it from CreditWatch, noting that GMAC's other business lines are performing well.
The outlook is negative.
The downgrade of Residential "reflects our concerns that profitability could remain very weak for at least the next few quarters," S&P credit analyst John K. Bartko said in a written statement.
With Residential operating at lower volumes of loan production concentrated in the lower-margin, prime-conforming segment and the continued uncertainty about the depths of credit stresses in the national mortgage and housing markets, the agency said it expects continued earnings weakness.
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