US CREDIT-ResCap volatile as GMAC's plans uncertain

By Karen Brettell

NEW YORK, Nov 17 (Reuters) - Residential Capital's bonds
are likely to remain volatile on continuing concerns over the
mortgage servicer's future as it continues to lose money and
parent GMAC changes its senior management.

The cost to insure ResCap's debt with credit default swaps
jumped on Tuesday after GMAC late on Monday said it would
replace its chief executive.

GMAC said Chief Executive Al de Molina has resigned and
will be replaced by Michael Carpenter, a former Citigroup Inc
senior executive who headed the global corporate and investment
bank and the alternative investments business. For details, see
[ID:nN16521527]

"De Molina is well respected by the investment community
and his sudden, and largely unexplained departure, is likely to
be viewed as a negative by GMAC/ResCap investors," Kirk Ludtke,
analyst at CRT Capital Group in Stamford, Connecticut, said in
a report.

ResCap's credit default swaps jumped to 40 percent the sum
insured as an upfront cost, or $4 million to insure $10 million
for five years, plus annual payments of $500,000, from 37
percent upfront on Monday, according to Markit Intraday.

The swaps have jumped from around 28 percent upfront on
Nov. 10.

GMAC, the financing arm for General Motors Corp GM.UL,
also said it has asked the U.S. Treasury to postpone any
decisions about putting more capital into GMAC until Carpenter
and other managers have assessed the current situation.

The company has taken $12.5 billion of rescue funds from
the U.S. government, and the government is looking to give it
about another $2 billion to $5 billion.

The request for time could reflect uncertainly among GMAC's
board members over the company's capital needs, said Ludtke.

"We continue to believe that GMAC's future capital needs
are largely dependent upon management's strategy for ResCap,"
he said

ResCap's debt has been volatile on speculation that GMAC
could spin off the money-losing arm. The company earlier this
month dragged GMAC to its third straight quarterly loss.
[ID:nN04458359]

ResCap's CDS had climbed in October on concerns that GMAC
could fail its capital test and spin off the company as a
result. The protection costs fell, however, when GMAC
successfully sold government-backed debt ahead of the test.
[ID:nN28305440]

From an operational standpoint, both GMAC and ResCap still
face significant challenges, said Mirko Mikelic, senior
portfolio manager at Fifth Third Asset Management in Grand
Rapids, Michigan.

"I don't think change at the highest level is going to have
much of an impact: GM's not selling enough vehicles and
ResCap's just hurting too much," he said.

GMAC would also be unlikely to find a buyer for ResCap at
all but the most distressed price, should GMAC choose to try to
offload the unit, he added.

CRT's Ludtke believes that GMAC and U.S. Treasury will
continue to seek to restructure ResCap outside of a
bankruptcy.

Placing ResCap into bankruptcy, however, would likely be
positive for GMAC's debt holders, as it would eliminate
uncertainty around the company's capital needs, he said.

GMAC's CDS traded on Tuesday at around 645 basis points, or
$645,000 per year for five years to insure $10 million in
debt.

Standard & Poor's said on Tuesday the management change
won't affect its ratings on either company, which remain deeply
distressed at CCC, eight steps below investment grade. The
ratings are on watch developing, indicating they could be
raised, lowered or left unchanged.

"The auto industry remains weak, and we think housing
prices will continue to fall in many markets, pressuring the
firm's mortgage business," S&P said in a statement.

(Editing by Kenneth Barry)