Moody's drops ResCap to Caa1

Moody's Investors Service said it downgraded to Caa1 from B2 senior debt ratings on Residential Capital, LLC (ResCap).

Separately, the agency downgraded the senior unsecured rating of GMAC LLC to B2 from B1. Both company's ratings are under review for downgrade.

ResCap's downgrade follows the resignation of two independent directors on the company's board, the agency said. The independent board members were considered key components of ResCap's corporate governance.

"The absence of independent directors increases the likelihood that ResCap will take actions that are negative for creditors," Moody's vice president Craig Emrick said in a written statement.

Moody's noted that according to the GMAC/ResCap operating agreement, ResCap cannot declare bankruptcy unless the board contains at least one independent director and a majority of the independent directors approve such action.

In its review, the agency said it would focus on liquidity, profitability prospects and likelihood of future support by GMAC.

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