Fitch Downgrades ResCap's IDRs To 'D' On Distressed Debt Exchange

NEW YORK--(BUSINESS WIRE)--Fitch Ratings has downgraded Residential Capital LLC's (ResCap) long- and short-term Issuer Default Ratings (IDRs) to 'D' from 'C' following completion of the company's distressed debt exchange (DDE). Fitch has also removed ResCap from Rating Watch Negative, where it was originally placed on May 2.

Fitch's action indicates that a default has occurred in accordance with Fitch's criteria on DDEs. Approximately $12.9 billion of outstanding debt is affected by this action. The exchange, which resulted in 80% of notes, tendered maturing 2008 - 2009 and 63% of notes tendered maturing 2010-2015, was necessary to extend debt maturities and increase ResCap's financial flexibility.

Fitch is in the process of assigning a post-default IDR and new issue level ratings reflecting a prospective view of ResCap and its new capital structure. Fitch believes that, when assigned, ratings will reflect ResCap's challenges to restructure the business and address liquidity pressures over the near-term. As part of these efforts, ResCap needs to complete a number of transactions with related parties. As such, new IDR and issue level ratings may be placed on Rating Watch Negative pending completion of these initiatives. Fitch would expect to assign new IDR and issue level ratings, including Recovery Ratings (RRs), within the next two weeks.

Fitch has downgraded the following ratings and removed them from Rating Watch Negative:

Residential Capital LLC

-- Long-term IDR to 'D' from 'C';

-- Short-term IDR to 'D' from 'C'.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.