GMAC Demand Notes

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Jack Cook
Posts: 81
Joined: Wed Jul 04, 2007 1:54 pm

GMAC Demand Notes

Post by Jack Cook »

Hi All, Does anyone have any information on the safety of the GMAC Demand Notes? I have an account with them and withdrew most of my funds when GM was doing very poorly last year. I know that a non GM entity bought over 50% of GMAC and am wondering if the notes are now any more safe in case GM slid into bankruptcy. Their present interest rate is 5.59% with a 5.75% annual yield.
Valuethinker
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Joined: Fri May 11, 2007 11:07 am

Re: GMAC Demand Notes

Post by Valuethinker »

Jack Cook wrote:Hi All, Does anyone have any information on the safety of the GMAC Demand Notes? I have an account with them and withdrew most of my funds when GM was doing very poorly last year. I know that a non GM entity bought over 50% of GMAC and am wondering if the notes are now any more safe in case GM slid into bankruptcy. Their present interest rate is 5.59% with a 5.75% annual yield.
My understanding is GMAC was bought by Cerebrus, a private equity firm.
(who just bought Chrysler from Daimler)

Private equity normally makes its money by increasing financial leverage, and hence risk.

I think it is probably worth checking Moody's/ S&P/ Fitch to see what they say in terms of rating the riskiness of GMAC paper. They are hardly a perfect guide (since GMAC pays them to do the rating, there is a clear conflict of interest) but it would give you a basis view.
xenial
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Location: USA

Post by xenial »

Why take on any company specific risk? Vanguard Prime Money Market Fund has a 7 day yield of 5.13%.

Best wishes,
Ken
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georgiabulldog
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Location: Stone Mountain, GA

GMAC Demand Notes Investment Risk

Post by georgiabulldog »

As an investor in GMAC Demand Notes, I have also been keeping my eye on the safety of investing in GMAC debt issuance. Moody's has rated the latest bond offerings from GMAC as BB+. I feel fairly comfortable holding GMAC Demand Notes as part of my cash allocation given the improving financial status of GM; however, the narrow yield spread between the Vanguard Prime Money Market Fund and Demand Notes makes me wonder if the risk is worth it.

Kipp
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DaveTH
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Post by DaveTH »

georgiabulldog wrote:Moody's has rated the latest bond offerings from GMAC as BB+.
A rating of BB+ is generally considered "junk".
Valuethinker
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Re: GMAC Demand Notes Investment Risk

Post by Valuethinker »

georgiabulldog wrote:As an investor in GMAC Demand Notes, I have also been keeping my eye on the safety of investing in GMAC debt issuance. Moody's has rated the latest bond offerings from GMAC as BB+. I feel fairly comfortable holding GMAC Demand Notes as part of my cash allocation given the improving financial status of GM; however, the narrow yield spread between the Vanguard Prime Money Market Fund and Demand Notes makes me wonder if the risk is worth it.

Kipp
Rating agencies also have a poor record of anticipating sudden defaults.
Enron was A rated months before it went bust.


GMAC should be alright. It's a good company, AFAIK. But part of the trick with Private Equity is to add leverage to the investee-- not sure whether/how Cerebrus is doing that.
richard.h.gao
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Re: GMAC Demand Notes

Post by richard.h.gao »

GM notes up to 2.25%
ScubaHogg
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Re: GMAC Demand Notes

Post by ScubaHogg »

richard.h.gao wrote: Thu Jun 23, 2022 12:32 am GM notes up to 2.25%
Just FYI you are bumping a thread from 2007
“Inflation is always and everywhere a monetary phenomenon.” - Milton Friedman
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