GMAC Demand Notes

[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]

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]

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

Best wishes,
Ken

[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

[DaveTH]

Moody's has rated the latest bond offerings from GMAC as BB+.

A rating of BB+ is generally considered "junk".

[Valuethinker]

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]

GM notes up to 2.25%

[ScubaHogg]

GM notes up to 2.25%

Just FYI you are bumping a thread from 2007