DBRS Revises Review of Residential Capital, LLC to Negative from Dev., Issuer Rating Remains at ‘C’

DBRS, Inc. (DBRS) has today revised its review of the ratings of Residential Capital, LLC (ResCap or the Company), including its Issuer and Long-Term Debt to Under Review with Negative Implications from Under Review Developing, where they were placed on December 14, 2011. The Issuer and Long-Term Debt ratings of ResCap remain at ‘C’.

DBRS’s rating action follows the Company’s announcement that it did not make a semi-annual interest payment due on April 17, 2012 related to its $1.75 billion 6.50% Notes due 2013, of which approximately $473 million is currently outstanding. The change in the review status reflects DBRS’s opinion that should the Company cure the breach of payment of interest within the 30-day grace period, ResCap will likely remain under significant stress, as such the ‘C’ rating remains appropriate. Moreover, the revision of the review considers that the failure to pay interest within the grace period would be an event of default per the indenture; as such, DBRS would lower the ratings to ‘D’ to reflect the default status.

Note:
All figures are in U.S. dollars unless otherwise noted.

The applicable methodology is Rating Finance Companies Operating in the United States, which can be found on the DBRS website under Methodologies.

The sources of information used for this rating include publicly available company documents. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

Lead Analyst: Steven Picarillo
Rating Committee Chair: Roger Lister
Initial Rating Date: 9 June 2005
Most Recent Rating Update: 14 December 2011