Capital Markets

GMAC Nets $2B in “Drive-by” Junk Offer

Total offering turns out to be twice the amount first expected by the former financing arm of General Motors.
Stephen TaubMay 11, 2007

GMAC raised $2 billion in a junk-bond offering on Thursday.

That was twice the amount first expected by the former financing subsidiary of General Motors. Last year, GM sold a majority stake to a group of investors led by Cerberus Capital Management.

The offering, GMAC’s first in six months, was a “drive-by” deal — that is, announced the same day it was to be sold — according to the Associated Press.

Joint lead managers were Barclays Capital, Citigroup, Credit Suisse, and Deutsche Bank Securities, according to published accounts.

The offering was made in two parts. According to Reuters, GMAC offered $1 billion in five-year 6.625 percent fixed-rate notes priced at 99.619 to yield 2.17 percentage points more than treasuries. The company reportedly also sold $1 billion of two-year floating-rate notes with a coupon rate of 1.25 percentage points over the three-month London interbank offered rate.

Both tranches were expected to be rated Ba1 by Moody’s Investors Service and BB+ by Standard & Poor’s, the highest possible speculative-grade ratings, the AP reported.

GMAC plans to use the proceeds for general corporate purposes, according to the AP. “The bond offering is part of our ongoing funding strategy to access markets opportunistically,” GMAC spokeswoman Gina Proia told the wire service.

GMAC had about $224 billion of debt outstanding as of March 31, according to the AP.