GM and GMAC: Fitch considers investment rating split

Fitch Ratings is looking at separating the credit ratings of General Motors and its finance division GMAC.

Fitch and other ratings services all currently rate General Motors BBB-, the lowest investment level, and assign it a negative outlook.

While GMAC is also rated BBB- by S&P and Fitch, it is put at Baa2 by Moody’s While the S&P and Fitch ratings are the lowest investment grade rating, the Moody’s rating is 2 levels above speculative grade.

GM’s current rating suggests that it could end up in the high-yield market, where some funds would have to sell off their shares in GM because they are not allowed to own bonds that are not rated at investment grade. S&P has said it would not separate the ratings of the two entities.

However, if Fitch were to separate the ratings of GM and GMAC, GMAC would probably remain at investment grade even if GM’s rating was reduced.

GMAC is also looking at creating a separate company out of its mortgage business. If that were to occur, the division of GM’s and GMAC’s credit ratings less of a possibility.

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