DETROIT — GMAC Financial Services reported that the U.S. Bankruptcy Court has approved a motion presented by General Motors, which allows GMAC to continue to conduct its direct operations with automaker in the "ordinary course" of business.

This is just one of the recent announcements after GM has filed for bankruptcy. Others include GM gaining permission to continue to help dealers, along with the potential sale of Hummer. Moreover, DBRS provided an update on GMAC's ABS transactions.

Related to the court approval, GMAC said it will continue to conduct all of its operations, including offering auto financing products and services to both GM and Chrysler dealers and customers.

DBRS Offers Update GMAC ABS Transactions

Also yesterday, DBRS reported that it has conducted an analysis of rated outstanding retail auto loan, lease and wholesale ABS transactions. GMAC originated and services each transaction. 

DBRS said it has confirmed the ratings for all outstanding retail auto loan and lease ABS transactions, which include: Capital Auto Receivables Asset Trust 2004-2, 2005-1, 2006-1, 2006-2, 2007-2 and 2008-1 and Capital Auto Receivables Asset Trust 2007-SN1. 

DBRS indicated it has placed the ratings for Superior Wholesale Inventory Financing Trust XI (SWIFT XI), a wholesale ABS transaction as "Under Review with Developing Implications." 

"The ratings action has been taken due to the occurrence of a rapid amortization event triggered by the bankruptcy filing and the impact on the performance of the collateral supporting the SWIFT XI trust caused by the bankruptcy filing," officials reported.

Furthermore, the company explained that certain positive credit factors are present to support the current ratings of the SWIFT XI transaction. 

"These factors include: consistent yield, an increase in GMAC personnel to monitor dealers and a sufficient diversification at the dealer level (currently 993 dealers in the trust). The business line is a core channel for GMAC and, more importantly, GM," executives noted.

The ratings agency also discussed the negative aspects.

"Negative credit factors affecting the rating include: the dependency of the trust on GMAC to generate new receivables; the fluidity and uncertainty surrounding GMAC and GM despite the fact that GMAC has benefited from key capital and liquidity support from the federal government," officials said.

"Through the GM bankruptcy process, dealers will be affected by the separation of the company into ‘Goodco' and ‘Badco' business line designations. It is unknown at this time which dealers within the SWIFT XI trust may be part of the franchises that are included in the ‘Goodco' and ‘Badco' franchises. The dealers that are part of the ‘Badco' franchises are subject to heightened risk of a decline in performance. Regardless of which business lines are identified as either ‘Goodco' and ‘Badco,' the market values of all GM-related vehicles that secure the loans supporting the SWIFT XI trust are in question, which is a risk to the transaction," according to the company.

DBRS said it will continue to monitor the status of the bankruptcy filing and its implications on the servicer, the servicers' operations and the performance of the obligors in the trusts.

"DBRS expects to resolve the Under Review status as expeditiously as possible and will provide updates as warranted," officials concluded.

GM Gains Court Approval to Continue Incentive Programs

While GMAC has not filed for bankruptcy, it still plays an important role in GM's business. And in related news, GM announced that it has received U.S. Bankruptcy Court approval to continue honoring all vehicle warranty programs and dealer incentive plans.

The court also granted approval for GM to access about a $33.3 billion debtor-in-possession financing facility from the U.S. Treasury and the Canadian and Ontario governments.

The court authorized GM to use up to $15 billion of the facility on an interim basis, pending a final order approving the full facility. The company explained that this credit facility will be used, among other things, for the company's normal liquidity requirements, including employee wages, health care benefits, supplier payments and other operating expenses.

GM said it intends to make payment for goods received and services provided to it on or after the filing date in the normal course of business and in accordance with terms of existing supplier agreements.

In addition, the bankruptcy court judge also granted approval for a number of other first-day motions that GM made as part of its chapter 11 filings.

The automaker indicated that the orders granted by the court will ensure that the company's business continues to function without disruption. GM has received authorization to, among other things: 

—Respect operating and financing agreements with GMAC, supporting continued wholesale financing for dealers and retail financing for customers

—Pay dealers' open accounts

—Pay essential suppliers and logistics providers for goods and services provided before and after the company's court filings

—Pay all non-U.S. suppliers to GM Corporation and its U.S. subsidiaries.

—Continue pay and benefits for employees and retirees; however, the amount of non-qualified pension for some executive retirees may be affected

—Preserves, on an interim basis, GM's tax carryforwards, including a substantial amount of foreign tax credits

—Approved, on an interim basis, sale procedures and a hearing date of June 30 for the proposed sale of assets under section 363 of the U.S. Bankruptcy Code

Furthermore, the court ordered that all banks honor employee paychecks, including those dated prior to the company's June 1 court filing.

Fritz Henderson, GM's president and CEO, said, "Today's rulings provide important assurance to customers and ensure that GM can maintain normal operations as we work to create and launch the New GM. We will proceed with continued focus on meeting the needs of our customers in everything we do."

GM Strikes Deal to Potentially Sell Hummer

GM announced today that it has entered into a memorandum of understanding with a buyer for Hummer, although the details of this remain vague. GM did not release the name of the potential buyer.

Officials said the sale is expected to close by the end of third quarter of this year and is subject to customary closing conditions, including receipt of applicable regulatory approvals.

The deal is expected to secure more than 3,000 U.S. jobs in manufacturing, engineering and at Hummer dealerships around the country.

The transaction also includes plans by the investor to aggressively fund future Hummer product programs. Under terms of the MoU, the identity of the purchaser and proposed financial terms of the agreement are not being released at this time, officials stated.

"Hummer is a strong brand," said Troy Clarke, president of GM North America. "I'm confident that Hummer will thrive globally under its new ownership. And for GM, this sale continues to accelerate the reinvention of GM into a leaner, more focused and more cost-competitive automaker."

Apparently, as part of the proposed transaction, Hummer will continue to contract vehicle manufacturing and business services from GM during a defined transitional time period.

For example, under the proposed agreement, GM's Shreveport Assembly plant would continue to contract assemble the H3 and H3T through at least 2010.

"GM has developed Hummer into a globally recognized off-road brand," said James Taylor, Hummer's chief executive officer. "The proposed agreement will enable us to continue that growth and maximize the brand's potential through new, innovative off-road vehicles with improved efficiency and alternative fuel powertrains.

"Today's announcement is great news for Hummer's current and future customers, dealers, suppliers and employees around the globe," he added.

Other terms and conditions specific to the sale are not being disclosed at this time. Citi acted as financial adviser to GM.