ResCap working with external advisers to evaluate strategic alternatives, sale opportunities

By Jennifer Lanning Drey

Portland, Ore., Feb. 5 - Residential Capital, LLC (ResCap) is working with external advisers to evaluate opportunities to optimize ResCap's balance sheet, Robert Hull, chief financial officer of ResCap parent GMAC Financial Services, said Tuesday during a conference call.

The company is considering strategic alternatives including potential acquisitions, dispositions, alliances and joint ventures with a variety of third parties with respect to some of ResCap's businesses, the company said in an 8-K filing made with the Securities and Exchange Commission on Tuesday.

GMAC and ResCap are in various stages of discussions with respect to some of the alternatives, the company said.

The company's external advisers are also exploring the sale of parts of ResCap's operations, according to the SEC filing.

Hull said Tuesday that the company is looking at all options for the business.

"We still believe ResCap is an integral part of our overall strategy at GMAC so it could be a component of it, it could be multiple components and I'll leave it at that," Hull said when asked during the question-and-answer session about which portions of the business ResCap may be looking to sell.

"Our attention is focused on ensuring we maintain liquidity and [on] meeting our funding obligations in 2008," Hull said during the formal portion of his presentation.

Of ResCap's $19 billion in unsecured debt, $4.4 billion will mature in 2008, including ResCap's $1.75 million term loan, Hull said.

"GMAC and ResCap continue to aggressively work to maintain adequate liquidity including negotiation of renewals, replacement facilities and use of other existing alternative liquidity sources," Hull said.

The company ended 2007 with cash and cash equivalents of $4.4 billion, down from $6.5 billion at Sept. 30. ResCap's cash balance declined due to cash expended on the fourth-quarter tender offer to repurchase debt at a discount and incremental cash requirements required to support inventory held in international operations.

ResCap reported a fourth-quarter net loss of $921 million, compared with a net loss of $128 million in the previous year's fourth quarter. The decline was attributed to asset write-downs on credit residuals and mortgage-backed securities, higher funding costs, market-driven impairments on real estate assets and equity investments and restructuring charges.

The performance decline was partially offset by gains from the retirement of debt and deconsolidation of several on-balance sheet securitization structures.

ResCap is a New York-based real estate finance company primarily focused on residential real estate markets in the United States, Canada, Europe, Latin America and Australia.

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