S&P lowers GMAC, ResCap

Standard & Poor's said it lowered GMAC LLC's long-term counterparty credit rating to CCC from B- and Residential Capital LLC's long-term counterparty credit rating to CCC- from CCC+.

The ratings on GMAC were removed from CreditWatch negative, where they were placed Oct. 9, and the outlooks for GMAC and ResCap are negative.

The rating actions follow the companies' third-quarter earnings release. GMAC continues to be pressured in its core auto finance business by elevated provisioning and overall weak economic conditions, S&P said. Additionally, residual values have waned in tandem with lessened demand for car and truck products, which has led to additional lease impairments.

S&P said the negative outlooks on GMAC and ResCap reflect the dire situation for both entities. ResCap represents a significant economic burden for GMAC, and because the agency does not anticipate the financial pressure at ResCap dissipating in the intermediate term, it said a strategic solution appears to be the only option within this time frame.

GMAC is considering various options including applying for status as a bank holding company, a potential debt exchange and accessing federal liquidity programs where possible. The agency said it is unclear as to the likelihood of achieving any of these alternatives or if any of them would lead to financial stability.

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