KKR Finally Closes GMAC Commercial Holding Deal

Target: GMAC Commercial Holding Corp.

Buyer: KKR, Five Mile Capital Partners and Goldman Sachs

Price: $8.8 billion

New Name for Target: Capmark Financial Group

General Motors has completed its sale of a majority stake of 78% of GMAC’s commercial mortgage business to KKR, hedge fund Five Mile Capital Partners and Goldman Sachs Capital Partners. The deal is worth $8.8 billion.

KKR and Cerberus-led groups still remain in the hunt for a controlling stake in the remainder of GMAC, which includes its residential mortgage business, ResCap, its finance operations and its insurance operations. These are estimated to be worth around $12 billion.

GMAC’s Commercial Holding Corp. (GMACCHC) division finances commercial real estate. GMAC initially said it would sell the stake to the KKR group in August, but at that time the KKR stake was only going to be 60 percent. The additional 18% stake was an undisclosed option that KKR had. The deal was supposed to have been closed in the fourth quarter—some speculated that there was a delay due to how KKR was interested in the rest of GMAC.

The deal was a success in obtaining for GMACCHC the much-coveted investment- grade ratings from rating agencies, although the ratings were still only on the threshold of junk. The 15-seat board will be led by Chairman Dennis Dammerman, formerly CEO of GE Capital Corp.

The deal includes $1.5 billion in cash as well as a the payment of $7.3 billion worth of inter-company loans. GMACCHC posted $332 million in net income last year. The multiple is around 2x book value.

GM is still looking to sell a controlling stake in GMAC and Cerberus remains the rumored favorite bidder in those discussions. That deal may not be coming soon. General Motors’ recent 10K called the GMAC sale a “complex endeavor” that it is working to finalize “as rapidly as we can.”

Troubled GM, which had a loss of $10.6 billion in 2005, is currently trying to reduce its U.S. hourly headcount by 30,000 by 2008. It also is looking to get rid of six assembly plants and is facing a potential strike at its largest supplier, Delphi.

A spokesman for KKR declined comment. —M.C.