The sale of General Motor’s Corp.’s financing arm clears a major hurdle, as the Pension Benefit Guaranty Corp. will not hold the new buyers liable for retirement benefits of former GM employees.
In April, a group of capital management firms and banks agreed to buy a 51% stake of General Motors Acceptance Corp. for an estimated $14 billion. One of the conditions of the sale was to free the new buyers from responsibility for retirement benefits for GMAC employees.
The consortium received a letter from PBGC, which oversees pension guarantees for the federal government, ensuring members would not be obligated to finance the retirement benefits.
The group that is buying controlling interest in GMAC is led by Cerberus Capital Management and includes Citigroup Inc., Aozora Bank Ltd. and a subsidiary of The PNC Financial Services Group Inc., which recently joined the consortium.
Certain other conditions under the agreement have yet to be satisfied, GM says.
GM is selling the car-loan program, as well as interests in other joint ventures, to raise cash to fund its long-term legacy costs, including health-care and retirement benefits, as part of the auto maker’s turnaround plan.
Another investment group, led by affiliates of Kohlberg Kravis Roberts & Co., Five Mile Capital Partners LLC, and Goldman Sachs Capital Partners, have acquired a majority interest in GMAC’s Commercial Holding Corp.
GMAC sold 78% of its equity in the real estate finance group, up from the previously announced 60% target, for more than $1.5 billion. The transaction garnered almost $9 billion for GM.