MoneyWatch

GM Selling Control Of Mortgage Unit

March 23, 2006 / 10:38 AM EST / CBS/AP

General Motors Corp. said Thursday that it is selling a majority interest in its commercial mortgage division for $1.5 billion in cash to a private investment group.

In addition to the cash payment for a 78 percent stake in the business, GM said that GMAC Commercial Holding Corp. has also repaid $7.3 billion in intercompany loans as part of the deal. That would boost the total proceeds from the deal to almost $9 billion.

The announcement comes a day after the world's biggest automaker and its major supplier, Delphi Corp., said they plan to offer buyouts to more than 125,000 hourly workers under an agreement with the United Auto Workers. Workers are expected to start leaving GM by June 1.

GM is under enormous pressure to reverse its fortunes. It recently had to increase by $2 billion its reported 2005 loss to $10.6 billion. It has been losing U.S. market share to Asian automakers who are building cars that are among the most popular with American consumers.

GM shares rose 23 cents, or just over 1 percent, to $22.24 in early trading on the New York Stock Exchange.

The buyer group includes Kohlberg Kravis Roberts & Co., Five Mile Capital Partners and Goldman Sachs Capital Partners.

GM said the deal for the commercial mortgage unit stake is separate from GM's announced plans to sell a controlling interest in the its overall finance business, General Motors Acceptance Corp.

"This sale is good news for GMAC and provides GMAC with even greater liquidity," GMAC spokeswoman Joanne Krell said.

GMAC Commercial Holding also announced that it has changed its name to Capmark Financial Group Inc. The name change will be fully implemented in the second quarter of this year. Capmark "will launch with an investment-grade rating," Krell said.

GMAC said in August that it had agreed to sell a 60 percent stake in its commercial mortgage holding business to Kohlberg Kravis Roberts and the other partners, but no financial details were released at that time. The mortgage unit has a loan servicing portfolio of around $250 billion.