Big Shitpile

RESCAP:

The risk of Residential Capital LLC defaulting on its debt soared on concern the biggest privately held U.S. mortgage lender may violate bank loan agreements, trading in credit-default swaps show.

Traders are speculating that Cerberus Capital Management LP and General Motors Corp. may allow the Minneapolis-based mortgage unit of GMAC LLC to fall into bankruptcy as the U.S. housing slump continues to deepen.

``As we continue to see conditions get worse and worse, the company clearly at some point has to reevaluate,'' Kathleen Shanley, an analyst at Gimme Credit Publications Inc. in Chicago, said in an interview. ``ResCap has an awful lot of secured debt, which raises the issue of `is it worth it.'''

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ResCap's agreements under $3.9 billion in bank loans required the company as of Sept. 30 to maintain a tangible net worth of at least $5.4 billion, according to a Nov. 8 regulatory filing. The company's net worth as of the same date was $6.2 billion, leaving it with an $800 million cushion.

GMAC posted the largest loss in its 88-year history this month because of $2.3 billion in losses at ResCap.