UPDATE 1-GM shares, bonds rise on GMAC bidding news


(Adds bond price information)

DETROIT, Jan 30 (Reuters) - Shares and bonds of General Motors Corp jumped on Monday after sources said on Saturday that banks and investors are bidding for a controlling stake in its financial services unit.

Hedge fund Cerberus Capital Management and Citigroup , the largest U.S. bank, have teamed up to bid for a controlling stake in General Motors Acceptance Corp., sources familiar with the situation told Reuters 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.

GM shares closed at $24.34, up 54 cents, or 2.3 percent, after rising 2.9 percent earlier in the day. Shares have risen more than 25 percent so far this year, after losing more than 50 percent of their value last year.

GMAC bonds with an 8 percent coupon due 2031 jumped 4.5 cents on the dollar to 102 cents on the dollar, according to MarketAxess. GM bonds did not generally trade as actively, but also rose.

The world's largest automaker has been plagued by high labor and raw materials costs, shrinking market share and sluggish sales of sport utility vehicles, and has seen its debt downgraded repeatedly by agencies such as Standard & Poor's and Moody's.

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.

Analysts have said the deal could fetch between $10 billion and $15 billion.

"The cash infusion stemming from a potential GMAC sale would give GM additional financial flexibility, though clearly at the expense of earnings power," UBS analyst Rob Hinchliffe said in a statement.

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. GMAC saw fourth-quarter net income fall 10 percent to $614 million, as its parent's "junk" debt rating increased its borrowing costs.

"The GMAC report is another positive in the context of extremely negative sentiment surrounding GM," Hinchliffe said, referring to the reports on the bidding, but added that financial "fundamentals" remain poor at the automaker.

Blackstone, Citigroup, GM, and Wachovia could not be immediately reached for comment. (Additional reporting by Dan Wilchins in New York)



Follow Us

Sponsored Introduction Continue on to (or wait seconds) ×