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Cerberus, Citigroup among bidders for GMAC

Hedge fund Cerberus Capital Management and Citigroup, the largest U.S. bank, have teamed up to bid for a controlling stake in General Motors Corp.'s GMAC financial services unit, sources familiar with the situation said on Saturday.
/ Source: Reuters

Hedge fund Cerberus Capital Management and Citigroup, the largest U.S. bank, have teamed up to bid for a controlling stake in General Motors Corp.'s GMAC financial services unit, sources familiar with the situation said on Saturday.

A second team of bidders includes Wachovia Corp., the No. 4 U.S. bank, and private equity firm Blackstone Group, the sources said. Other private equity firms also have toyed with the idea of joining the bidding, other sources said previously

No decision on a GMAC deal was imminent, sources said on Saturday.

GM said in October it wanted to sell the GMAC stake to a strategic partner to restore the unit's credit rating to investment-grade status and gain access to cheaper financing.

A sale of a stake in GMAC, which analysts said could fetch between $10 billion to $15 billion, would give GM a much-needed cash windfall, analysts said.

GM on Thursday reported a worse-than-expected fourth-quarter net loss of $4.8 billion, bringing its total losses for all of 2005 to $8.6 billion.

That marked the fifth-straight quarterly loss for the world's largest automaker, which has been plagued by high labor and raw materials costs, shrinking market share and sluggish sales of sport utility vehicles.

GM also has said it may consider strategic alternatives for GMAC's mortgage operation, ResCap, which analysts see as the crown jewel of GMAC, to help preserve ResCap's separate investment grade rating.

Kohlberg Kravis & Roberts Co. may join with Wachovia to bid on GMAC, the The Wall Street Journal reported on Saturday.

A private equity consortium led by KKR bought a 60 percent stake in GMAC's commercial mortgage unit in August, leading industry analysts to speculate that KKR might lead a bid for ResCap.

Higher borrowing costs have begun to erode profits at GMAC. GMAC earned $614 million for the fourth quarter of 2005, down from $683 million in fourth quarter of 2004.

The total debt for GM and its finance arm was $286 billion at the end of 2005.

GMAC's debt is rated "BB" by debt-rating agency Standard & Poor's, two steps below investment grade, meaning it is now in the "junk bond" category, and "Ba1" by Moody's, one step below investment grade.

S&P and Moody's have put the GMAC ratings under review and have said they may slash the ratings deeper into junk if a partial sale of GMAC does not take place.

Blackstone, Cerberus, Citigroup, GM, KKR and Wachovia could not be immediately reached for comment.