General Motors May Announce GMAC Stake Sale Next Week (Update2) March 31 (Bloomberg) -- Gen... General Motors May Announce GMAC

March 31 (Bloomberg) -- General Motors Corp., the world's largest automaker, may announce an agreement as soon as next week to sell control of its finance unit to investors led by Cerberus Capital Management LP, people with direct knowledge of the matter said.

Cerberus, based in New York, is teaming up with investors including Citigroup Inc.'s private-equity unit to bid for General Motors Acceptance Corp., said three people, who declined to be identified before a formal agreement is reached. The Cerberus-led group offered about $11 billion in January for 51 percent of GMAC, a provider of auto loans, insurance and mortgages, one of the people said.

A sale would bring GM Chief Executive Officer Rick Wagoner a step closer to reducing the cost of making auto loans by regaining an investment-grade rating for GMAC. GMAC's credit rating, along with its parent's, was cut to junk last year as the company reported losses of $10.6 billion. Detroit-based GM is selling assets, firing workers and trying to get union workers to quit to cut losses.

Aozora Bank Ltd., owned by Cerberus, and Norinchukin Bank Ltd., a Japanese bank for farm cooperatives, will help fund the GMAC purchase, said one of the people with direct knowledge of the bid. Final details aren't yet complete and a deal could still be delayed past Monday, the person said.

Cerberus Chief Operating Officer Mark Neporent didn't return a call seeking comment. Citigroup spokesman Jon Diat in New York declined to comment, as did Tokyo-based spokesmen Tsutomu Jimbo for Aozora and Takeshi Mashima for Norinchukin.

``We're still actively engaged in pursuing the possible sale of a controlling interest in GMAC,'' GMAC spokeswoman Toni Simonetti said. She declined to comment on the likelihood or timing of a deal.

Wagoner, 53, has been shedding assets to cover the cost of developing new cars and trucks to win back buyers lost to competitors such as Toyota Motor Corp. GM's U.S. market share fell last year to its lowest since 1925 as Toyota and other Asian automakers' share rose to a record.

GM yesterday said it's in talks to sell shares of Japan's Isuzu Motors Ltd. The 7.9 percent stake in Isuzu is valued at 40 billion yen ($340 million). GM has raised $2.7 billion selling shares of Fuji Heavy Industries Ltd. and Suzuki Motor Corp.

Last week, a group led by Kohlberg Kravis Roberts & Co. paid $1.5 billion for 78 percent of GMAC Commercial Holding Corp. The unit repaid $7.3 billion in outstanding loans to GMAC.

Cerberus has been the leading bidder for GMAC since Wachovia Corp., the fourth-largest U.S. bank, dropped out, people familiar with the talks said last month.

GM has made more money from auto loans and mortgages than building cars and trucks since 2002. Last year, the auto unit lost $12.9 billion and GMAC earned $2.4 billion, according to revised figures filed by the automaker this week.

Standard & Poor's Corp., Fitch Ratings and Moody's Investors Service have given GMAC a higher credit rating than GM since late last year on the expectation of a sale.

S&P, which rates GM debt five steps below investment grade at B, has left GMAC three steps higher at BB. Moody's rates GMAC at Ba1, five grades above GM. Fitch has the finance unit at BB, three steps above GM. All three ratings companies have said they will cut GMAC back to the same level as GM without a sale.

GMAC's 5.375 percent euro-denominated bond due in 2011 rose 0.5 cent to 91 cents on the euro, according to Fortis Bank. GM's 7.25 percent euro-denominated bond due in 2013 rose 0.25 cent to 75.75 cents on the euro.

The annual cost of insuring $10 million of GMAC debt for five years using credit default swaps fell 20 basis points, or $20,000, to 395 basis points, according to Deutsche Bank AG.

Investors use credit-default swaps to protect against non- payment on debt, or trade them as a way of betting on a company's credit quality. Swap prices typically decline when creditworthiness improves and rise when it worsens.

GM delayed filing its annual report with the U.S. Securities and Exchange Commission until this week after saying on March 10 that it wouldn't miss a March 16 deadline. The report, which restated results from 2000 through 2005, resulted in a GM credit downgrade deeper into junk from Moody's and a warning from S&P that it might follow.

Cerberus, named for the three-headed dog that guards the gates to the underworld in Greek mythology, was founded in 1992 by Stephen Feinberg and William Richter. The firm was part of a group that this year agreed to buy U.S. grocery chain Albertson's Inc. for about $9.8 billion.

Former U.S. Vice President Dan Quayle heads up Cerberus's international activities and David Thursfield, who ran Ford Motor Co.'s operations outside of North and South America until April 2004, runs a Cerberus automotive unit.

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