NEW YORK, February 15 (FinanceEnquiry.com) - Standard & Poor’s Rating Services lowered long-term issuer credit rating on Residential Capital LLC from ‘CCC’ to ‘CC’, and issue-level ratings on ResCap’s junior subordinated and senior unsecured debt from ‘CC’ to ‘C’.  While issuer credit rating and issue level ratings are maintained on CreditWatch with negative implications, and ‘C’ short-term credit rating is kept on CreditWatch negative.
 
Brendan Browne, Standard & Poor’s credit analyst, mentions that the downgrade indicates that ResCap may lack enough liquidity to meet the maturities of two senior credit facilities that Ally Financials Inc offers. In November, S&P downgraded issuer credit rating on ResCap to ‘CCC’ and assigned ratings to CreditWatch with negative implications, after losing major confidence that Ally will remain supportive to the entity. In recent years, Ally has offered ResCap support in form of billions of dollars of equity and debt, allowing ResCap to absorb huge losses linked to its mortgage activity. Moreover, Ally excused almost $200 million of ResCap’s debt following the subsidiary posted significant loss in Q4’2011, and disrupted a debt covenant. As a result, the debt forgiveness provided additional equity to ResCap, and brought it to covenant compliance.