|
GMAC buys BNY affiliate
|
 |
June 8, 1999: 12:12 p.m. ET
GM's financing arm to pay $1.8B for Bank of New York lending unit
|
NEW YORK (CNNfn) - General Motors Acceptance Corp., the financing division of General Motors Corp., said Tuesday it plans to purchase Bank of New York Co.'s asset-backed lending unit, BNY Financial Corp., for $1.8 billion in cash.
Bank of New York said it will have a pretax gain of about $1.05 billion on the sale, the proceeds of which it will use to buy back about 4 percent of its outstanding shares. The sale also will allow the bank to focus on its core business of buying and selling financial securities for its larger corporate clients, the mainstay of its business.
"It makes our income stream more stable, it reduces interest spread risk, it reduces our credit risk -- from our viewpoint it was a very good transaction," said Frank Scarangella, a Bank of New York spokesman, adding that the acquisition isn't expected to result in any job reductions.
BNY Financial is one of the largest arrangers of loans to medium and large businesses in North America and the U.K., with more than 3,000 clients. Last year, BNY had $26.7 billion in sales and $39 billion in assets.
Its parent, Bank of New York, tends to make most of its profit buying and selling securities for its clients, particularly during periods of market volatility. In the first three months of 1999, fees from securities processing rose 27 percent to $291 million, accounting for about half the bank's non-interest income.
Scarangella said the bank had entertained other inquiries about purchasing its asset-backed division, though it hadn't really been focused on selling it until GMAC came along.
"We had potential buyers making inquires, but we weren't out peddling the business," he said.
As for GMAC, the BNY Financial purchase will help position it as one of the leading auto and personal loan financiers in the world. GMAC, a wholly owned unit of General Motors Corp. (GM), handles much of the personal financing for buyers of GM cars and trucks. It also arranges commercial and residential mortgages and sells insurance.
At the end of March, GMAC's owned assets and serviced automobile receivables exceeded $140 billion, and combined serviced assets of the GMAC Mortgage Group exceeded $250 billion.
GM shares fell 5/16 to 68-13/16 in midday New York trading. Bank of New York shares rose 2-5/6, or almost 7 percent, to 37. 
|
|
|
|
|
|
Bank of New York
GMAC
|
Note: Pages will open in a new browser window
External sites are not endorsed by CNNmoney
|
|
|
|
 |
|
