General Motors raised $9bn by selling more of its commercial mortgage business than originally planned on Thursday when the troubled carmaker finalised a year-old deal with three private equity groups.GM Acceptance Corp, the carmaker's finance arm, sold 78 per cent of the commercial mortgage division after investors exercised a previously undisclosed option to buy an extra 18 per cent.The completion of the deal came a day after GM agreed wide-ranging early retirement offers with Delphi, its biggest supplier, and the United Auto Workers union that could cost the carmaker billions in severance payments.The controlling stake in the commercial mortgage unit, renamed Capmark Financial Group, was sold to an investor group including Kohlberg Kravis Roberts, Five Mile Capital Partners and Goldman Sachs Capital Partners. The group paid GMAC more than $1.5bn in cash and repaid intercompany loans totalling $7.3bn, according to GMAC.A sale of 60 per cent of the unit and intercompany loan repayments of about $4bn had been expected after the deal was announced last year."We are expecting strong returns on the significant investment that GMAC will retain in this business," said Eric Feldstein, chairman of GMAC. "At the same time, this transaction will enable GMAC to redeploy a significant amount of capital – almost $9bn – to other critical areas of our business."Concurrently with the acquisition, a 4 per cent stake in Capmark has been sold to management, leaving the investor group with about 75 per cent and GMAC with 21 per cent.The deal was provisionally agreed 11 months ago, but GM said it was "a complicated business".Under its new ownership Capmark, which has a $276bn mortgage servicing portfolio, has raised $10.75bn in loans from a syndicate of banks. Fitch, the rating agency, has rated the group at the investment grade BBB level, citing the company's "strong and growing franchise in all facets of commercial mortgage banking, experienced management team, and sound level of core earnings."Fitch noted that Capmark's rating is not linked to GMAC's because the latter is now a minority shareholder. Capmark said it had also garnered investment grade ratings from the other two big rating agencies.KKR, Five Mile Partners and Goldman Sachs said in a joint statement: "We look forward to working with the management team to realise the company's full potential by making use of the wide range of funding options now available to Capmark." The deal should help the commercial mortgage business to expand after several years of increasingly limited access to capital caused by the steady decline in the creditworthiness of GM and GMAC, which have both lost their investment grade ratings and fallen to junk status.Since October, GM has also been trying to sell a majority stake in GMAC itself, with the aim of boosting the credit rating of the finance unit as a whole. GMAC's decline to junk status has limited its funding options and constrained its business. Two investor groups, one led by hedge fund Cerberus and the other by KKR, are believed to be in the running.
/ Source: Financial Times