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