S&P cuts GMAC, ResCap ratings deeper into junk

NEW YORK (Reuters) - Standard & Poor's on Friday cut its ratings on GMAC LLC and its residential mortgage unit Residential Capital LLC deeper into junk territory, citing "intense financial stress" at the companies.

GMAC said on Wednesday that it lost $2.52 billion in the third quarter, hurt by slumps in the housing and auto markets, and that its Residential Capital LLC mortgage unit may fail.

"Residential Capital LLC represents a significant economic burden for GMAC," S&P said in a statement. "We do not anticipate the financial pressure at Residential Capital LLC dissipating in the intermediate term. Therefore, a strategic solution appears the only option within this time frame."

GMAC's core auto finance business is also suffering from elevated provisioning and overall weak economic conditions, the rating agency added.

S&P cut GMAC's rating two notches to "CCC," eight steps below investment grade and cut ResCap two notches to "CCC-minus," nine steps below investment grade.

S&P's outlook for both companies is negative, indicating an additional downgrade may be more likely in the next one-to-two years.

GMAC is evaluating options including applying for status as a bank holding company, a potential debt exchange, and seeking federal assistance to shore up its liquidity.

However, "it is unclear as to the likelihood of achieving any of these alternatives, or if any of them would lead to financial stability for GMAC or Residential Capital LLC," S&P said.

(Reporting by Karen Brettell; Editing by Andrea Ricci)