TEXT-S&P: GM, GM Financial ratings unaffected by Ally deal

Fri Nov 23, 2012 11:21am EST

Nov 23 - Standard & Poor's Ratings Services said today that the announcement
by General Motors Co. (GM; BB+/Stable/--) that it will acquire Ally
Financial Inc.'s (Ally; B+/Positive/C) auto finance businesses in Europe
and Latin America and joint-venture stake in China has no immediate effect on
the ratings on GM or its lending arm General Motors Financial Co. Inc. (GMF;
BB/Stable/--). GM plans to meld Ally's operations with GMF. GM will inject $2
billion of equity into GMF using its substantial cash balances (which amounted
to $31.6 billion as Sept 30, 2012). GM expects the closings of all businesses to
occur by mid 2013. This transaction further moves GM toward the captive finance
model that is common in the global auto sector, although prime customers in the
large North American market are likely to be mostly financed by GM's partner
banks and other banks for the foreseeable future. 

For GMF, we think the purchase approximately doubles its asset base, consists 
of mainly prime customers, improves its funding mix, and increases the 
geographic coverage of its operations substantially. We believe this will be 
positive over the longer term for the stand-alone credit profile (SACP) of 
GMF, which we currently assess as 'b+'. We will reassess the SACP on GMF as 
the closings occur. While integration risk exists, we view this risk as 
manageable because the Ally operations were formerly part of GM's large 
captive finance unit that was sold in 2006. 

Still, the issuer credit rating on GMF is unlikely to increase in the near 
term unless we designate it as having core status to the GM group. This 
transaction, once closed, could support an eventual designation as core. We 
currently give the GMF rating a two-notch uplift because we consider it a 
strategically important subsidiary of GM.