GMAC sells reinsurance unit, 2 insurers to Maiden
NEW YORK (Reuters) - GMAC LLC, the money-losing finance company, sold a reinsurance business to Maiden Holdings Ltd (MHLD.O) and plans to sell two insurance units to the Bermuda-based company, to bolster capital and add liquidity.
Terms were not disclosed but Maiden said on Monday it plans to raise $260 million from a rights offering to help fund the transactions.
Maiden said it acquired the GMAC Re reinsurance business of GMAC Insurance and renamed it Maiden Re. It also plans to buy GMAC Direct Insurance Co and Integon Specialty Insurance Co, pending regulatory approval.
GMAC is shedding profitable assets after suffering $7.2 billion of losses in the seven quarters ended June 30.
The lender has been hurt by soaring credit losses at its Residential Capital LLC mortgage unit, and by writedowns of leases on sport-utility vehicles that drivers no longer want. GMAC's credit ratings have fallen deep into junk status, and many analysts have questioned its survival prospects.
Private equity firm Cerberus Capital Management LP [CBS.UL] owns 51 percent of Detroit-based GMAC, while General Motors Corp GM.N owns 49 percent.
GMAC has said it wants to become a bank holding company and plans to overhaul and slash its debt load, just months after completing a $60 billion refinancing package in June.
"This (Maiden Holdings) deal helps address some of our current concerns, given this historic market turmoil, by providing the company with liquidity as well as shoring up capital," GMAC Insurance spokeswoman Sarah Comstock said. She declined to say whether GMAC might sell other insurance assets.
GMAC Re in 2007 had a $65 million pre-tax profit on policy sales of $525 million, Maiden said. Following the transaction, Maiden said it will have at least $1 billion of annual written premiums. About 120 GMAC Re staff will join the company.
Reinsurers provide insurance coverage to insurers, in return for premiums.
Maiden shares rose 45 cents, or 10 percent, to $4.97 in morning trading on the Nasdaq.
(Reporting by Jonathan Stempel; editing by John Wallace)
