General Motors and GMAC bonds fall on restatement

General Motors Corp's and its finance unit's bond prices fell on Friday after the automaker increased its 2005 loss by $2 billion due to accounting errors and said it would delay filing its annual report.
GM's wider losses include about $1.3 billion ($1.9 billion pretax) of increased charges for the automaker's exposure to its bankrupt key supplier, Delphi Corp.
"The most important things for GM to do is to file the annual report before March 31 to avoid a technical default and avert a strike at Delphi," said Brad Rubin, a senior credit analyst at BNP Paribas.
Late on Thursday GM said its 2005 loss was $10.6 billion, $2 billion more than previously reported. The ailing automaker also delayed filing its annual report with securities regulators for two weeks due to accounting errors and said it will restate results from 2000 to 2004.
The increased Delphi charge "reflects developments in the discussions with Delphi and the UAW on a comprehensive agreement," GM said, referring to the United Auto Workers union.
Dan Ilany, an auto analyst at Bear Stearns, said in a research report published on Friday: "We see a silver lining in the higher Delphi reserve as it suggests that the company is closer to a settlement with the union and hence better able to estimate the cost of the agreement."
However, the restatement announcement could make the pending GMAC sale more difficult, BNP Paribas' Rubin said. GM said in October it wanted to sell its majority stake in GMAC.
GM's 8.375 percent bond due 2033 fell 1.25 cents to nearly 73 cents on the dollar, according to MarketAxess. GMAC's 8 percent bond due 2031 fell 2 cents on the dollar to 92.38 cents on the dollar.
Standard & Poor's and Fitch Ratings said GM's filing delay has no immediate effect on the credit ratings of GM, its finance unit General Motors Acceptance Corp, or GMAC's mortgage unit, Residential Capital.
Moody's Investors Service, however, said it may downgrade ratings on both GM and GMAC deeper into junk territory and may downgrade Residential Capital to junk status. Most spreads in the secondary market were unchanged, while in the primary market, Tyson Foods Inc sold $1 billion of 10-year notes. In addition, MidAmerican Energy Holdings is expected to sell $3.25 billion in 30-year debt via private placement next week, a market source said on Friday.
The US corporate bond market absorbed about $11.5 billion in debt this week, $10 billion of which was high-grade debt, according data firm Dealogic. So far this year, the market has absorbed $166.8 billion in high-grade and high-yield debt, Dealogic said.