On the block

Tokyo, March 7 (Reuters): Japan’s Norinchukin Bank, a central bank for agricultural co-operatives, is considering joining a consortium led by US Cerberus Group to acquire General Motors Corp’s finance arm, GMAC, a source close to the company said on Tuesday.

The troubled US auto giant has been looking to sell a controlling stake in General Motors Acceptance Corp to a strategic partner to restore the profitable unit’s credit rating to investment-grade status and get access to cheaper financing.

Participation by Norinchukin, one of Japan’s healthiest banks with assets of around 62 trillion yen ($527 billion), would be a step toward that goal. Rating agencies have said they would only separate GM’s and GMAC’s ratings if GMAC were sold to a buyer with a strong balance sheet.

The source declined to give details, but said Norinchukin is considering the case as a possible investment option.

A spokesman at the bank declined to comment. Japanese business daily Nihon Keizai reported on Tuesday that Norinchukin was expected to invest around $1 billion in GMAC.

The unlisted bank is exploring several investment ideas, including directly buying shares of GMAC or indirectly investing in the unit through an investment firm, as it plans to seek future capital gains, the newspaper said.

A private equity unit of Citigroup, the largest US bank, and hedge fund Cerberus Capital Management are among bidders for GMAC, sources have said.

Norinchukin emerged from Japan's decade-long bad-debt crisis with one of the banking sector’s healthiest balance sheets, and in recent years has used its strong capital base to broaden its range of investments.

Last year, it formed a retail-banking alliance with Mitsubishi UFJ Financial Group (MUFG), Japan’s biggest bank, and said late last month it would pay 100 billion yen ($850.5 million) to buy preferred shares in MUFG held by the government.

Founded as a quasi-government institution in 1923 and privatised in 1959, Norinchukin’s assets are about 50 per cent more than those of Resona Holdings Inc, Japan’s fourth-biggest listed commercial lender. GMAC provides automotive and commercial financing as well as mortgage and real-estate services, and earned $2.8 billion last year even as GM’s auto operations lost money.

Analysts have said a sale of a controlling stake in GMAC could fetch GM between $10 billion and $15 billion. Last year, ratings agencies such as Standard and Poor’s and Moody’s have cut GM’s credit ratings deeper into junk territory.