Thursday, November 1, 2007

GMAC Q3 2007

Overall --home-loan unit is called ResCap --GM owned 49% stake, Cerberus Capital Management 51% --1.6 bill loss, 1.8 bill loss in ResCap --Goodwill impairment 455 mil at ResCap, 2006 695 mil --weakening credit and housing market increased reserve, writedown... Segment performance --Auto line performed well NI increased >60% from 320 to 519 mil, rev 237 to 403 mil --ResCap, poor, 1.8 bil loss and 455 mil goodwill impairment Credit Metrics ResCap - mortgage - Subprime/CDO --2.3 bil loss, 1.8 bil + 455 mil goodwill impairment --cost structure a.provision -884 mil, b.HFS(Hold For Sale) evaluation adjustment -670 mil, c.trading sec vluation loss -333 mil, d.goodwill -455 mil, e.REO impairment -145 mil, f.lot option/model home impairment -98 mil --existing exposure 30 bil irregardless of classifications (6.6 bil are dangerous nonprime, HEL, non-performing, 2bil are most dangerous) --detailed exposure at the end of Q3 a.HFS 15 bil (nonprime 20%, 3 bil) b.HFI 21.7 bil (nonprime 19%, 4 bil) c.Warehouse Lending Receivable 1.8 (nonprime 12%, 300 mil) d.loan servicing portfolio 427.4 bil (nonprime 10%, 42.7 bil) --- not a problem when interest rate is falling due to natural hedge of MRS (high origination fees and gain on sale offset the impairment of portfolios) the relationship does not work well when there are substantial repayment and refinancing credit quality of MLHFI --nonaccural loan/total MLHFL 14.1%, up --net charge off/total MLHFL 0.7%, up --loan loss allowance 2.85%, up --analysis: a.writedown of trading assets and HFS around 1 bil, exposure subprime HFS and lending receivable 3.3 round to 4 bil, ratio 25% writeoff, at least 1/18 (5% writeoff) b.500 mil more wrieoff Liquitidy --$1 bil equity injection from GMAC out of 6.2 bil --secured funding 20 bil from Citi, committed secured funding 4.6 bil Evaluation --BB+, 7y cash bond T+483 bps --5y CDS, 500 bps --ResCap 10y T+1000 bps comments --1.8 bil good at the end of 2006, only 445 writedown in Q3, another $400 mil in Q4 --expected NI: -1 bil (ResCap -1.5 bil loss after tax) --hardly breakeven until end of 2008 because of goodwill --ResCap is a mess

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