HORSHAM, PA-Both Chris Wolfe of Fitch Ratings and a GMAC spokeswoman tell GlobeSt.com that GMAC's need to restate financial results for the first three quarters of 2004 and 2005 will have no impact on GMAC's March 23 sale of a 78% stake in GMAC Commercial Holding Corp. "That sale has closed," the spokeswoman says. The majority owner is a partnership among Kohlberg Kravis Roberts, Five Mile Capital Partners and Goldman Sachs Capital Partners.
Neither will the restatement impact the nearly $10.8-billion loan facility that Capmark, which is GMACCH's new name, obtained from a syndicate of banks at the time of the sale. "The bank lines have moved," she says. General Motors continues to explore the potential sale of a controlling interest in GMAC, and she says that prospect is not impacted by the restatement either.
The risk factors delineated in GMAC's latest 10-K filing with the SEC were expanded to GM's exploration of the potential sale of a controlling interest in GMAC, she explains, "a factor that was not included in prior 10 Ks, because Rick Wagoner [GM's chairman and CEO] had not yet announced that potential." In published reports, analysts concur with the spokeswoman's assessment. One, who called the restatement "a minor bookkeeping adjustment," suggested it caught press attention because GM's financial shortfalls and consequent layoffs are in the news.
Regarding any impact of the restatement, Wolfe tells GlobeSt.com, "in short, none." The accounting errors requiring a GMAC restatement apply primarily to Residential Capital Corp., GMAC's residential mortgage subsidiary. Fitch's ratings for GMAC and ResCap remain on "Rating Watch Evolving."
The required restatement pertains to the erroneous classification of cash flows from certain mortgage loan transactions. "While Fitch is concerned that the companies did not properly apply appropriate GAAP [generally accepted accounting procedures] related to the associated cash flows from loan originations, Fitch does not believe that what amounts to a reclassification of these cash flows is analytically significant," Wolfe writes in a report.
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