Fitch Ratings last week gave General Motors Corp.'s senior unsecured debt a 41% recovery rating, a number in line with estimates from the derivatives market.

The rating agency simultaneously lowered the troubled auto company's issuer default rating another notch to B' from B+.' Its analysts said the failure of GM's suppliers to provide trade credit, or an extended strike by Delphi Corp. workers, would likely be enough to push the company into bankruptcy.

Despite what seems to be a prolonged sale process of GM subsidiary General Motors Acceptance Corp., Fitch analysts said during a conference call that the sale looks to be on track. Analysts pinned the delay on the complexity of financial ties between the two entities, and said without elaborating that they anticipate steady progress through the first quarter.

If GMAC appeared to be off the table, the financing arm's corporate credit rating, currently BB,' would sink back down to GM's level, analysts said.

Some callers speculated that GM may opt to sell Residential Capital Corp. instead. GMAC last year established ResCap as a holding company and transferred ownership of GMAC and Residential Funding Corporation underneath it in a move to enhance liquidity.

(c) 2006 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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