Thursday, November 22, 2007

ResCap recovers

GMAC's mortgage unit ResCap bonds were trading as if a pending bankruptcy announcement was imminent. Today ResCap offered to buy back $750 million of bonds at a premium to where they were trading, but at 83 or 76 cents on the dollar.

ResCap, as of Sept 30, had a tangible net worth of $6.2 billion, but they are required by debt covenants to maintain a net worth of $5.4 billion, and by purchasing these bonds at a discount, it increases their tangible net worth. They've bought themselves time, and if they could acquire Northern Rock at a distressed price, ResCap would be in a position to profit when housing turns.

One of the bear's thesis for a mortgage meltdown has now been averted.

2 comments:

Anonymous said...

The beleaguered mortgage market has undermined ResCap's business, which has become unprofitable and is detracting from GMAC's income.

zzyytt said...

canada goose
coach outlet store
nike air max 2017
golden goose sneakers
golden goose
goyard bag sale
off white jordan 1
pandora bracelet
kobe sneakers
adidas outlet