(Recasts first paragraph; adds analyst comment, updates bond market moves)
NEW YORK, April 30 (Reuters) - GMAC Financial Services has reached an agreement to provide auto financing for Chrysler’s dealers and customers and in turn will receive capital from the government, GMAC said in a statement on Thursday.
The financing deal was reached as Chrysler filed for bankruptcy and announced a deal with Fiat after talks to restructure its debt broke down. For details click on [ID:nLU940906].
The move to serve as a primary source of financing for Chrysler will help diversify GMAC’s automotive business, GMAC Chief Executive Officer Alvaro de Molina said in a statement. GMAC, a bank holding company, provides financing for General Motors Corp’s (GM.N) cars.
The cost of insuring GMAC’s debt with credit default swaps fell sharply on Thursday after the news to 19 percent upfront from 26 percent upfront earlier in the day, plus 500 basis points a year, according to data from Phoenix Partners group.
“It’s another source of business so that’s always nice when you can pick up some incremental volume,” said Pete Hastings, an analyst at Morgan Keegan in Memphis.
In a statement on the Chrysler bankruptcy, U.S. President Barack Obama said his administration will be providing additional capital to GMAC to help unlock frozen credit markets and free up lending for auto sales.
Bonds of General Motors Corp (GM.N), which has a minority stake in GMAC, were little changed. Its 6.75 percent bonds due in 2028 rose to 10 cents on the dollar from 9.625 cents on Tuesday, their previous significant trade, according to MarketAxess. Its benchmark 8.375 percent bonds due in 2033 fell to 8.3 cents on the dollar from 8.5 cents.
GM’s bonds were not affected by the GMAC deal because their pricing is tied to the outcome of a debt exchange offer now outstanding or the amount that bondholders recover if GM files for bankruptcy, Hastings said.
Reporting by John Parry and Dena Aubin; Editing by Theodore d'Afflisio