Fitch drops ResCap to D

Fitch Ratings said it downgraded Residential Capital LLC's long- and short-term issuer default ratings to D from C following completion of the company's distressed debt exchange. Ratings were removed from Rating Watch negative, where they were placed on May 2.

The downgrade indicates that a default has occurred, according to Fitch. The exchange resulted in 80% of notes and was necessary to extend debt maturities and increase ResCap's financial flexibility, the agency said.

New ratings assigned to the company likely will reflect its challenges to restructure the business and address liquidity pressures over the near-term, Fitch noted.

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