Auto Loans Feeling Subprime Squeeze

The subprime mortgage market was in the news again on Tuesday when a debt package for General Motors was postponed. This postponement led to more borrowing costs on the automaker’s debt, making the $3.5 billion buyout the largest leveraged deal to be postponed this year.

Auto loans, mortgages, etc. – everything is falling because of the subprime problems that the country is currently facing. With an overhang of $250 billion (approx.) in leveraged loan financing their investors started putting some distance between themselves and the proposed deal. No one wants to put their neck out for anyone else, per Brad Rubin, BNP Paribas’ senior auto sector trading specialist.

The auto loans that the company was trying to get and failed, at the present time, is not concerning them, according to their spokeswoman Renee Rashid-Merem. She says that they fully expect the deal to close at some point – and they are just waiting for it to get back on track. When it does, the buyout will be completed.

The investors however, have appeared somewhat shaken by the pulled auto loan deal, and an even larger auto loan package for DaimlerChrysler is now in jeopardy as well. They were having a hard enough time trying to find someone to buy it, and now with this snag it will indubitably get even harder.

 

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