KKR Is Said to Bid for GMAC

A group of investors led by private equity firm Kohlberg Kravis Roberts & Co. has submitted a nonbinding bid of $12.5 billion to $13 billion for a majority stake in General Motors Corp.’s financing arm, a source familiar with the matter said Wednesday.

The KKR bid for the General Motors Acceptance Corp. stake, made this month, follows an earlier proposal by hedge fund Cerberus Capital Management and was originally reported in the Wall Street Journal.

GM is still considering the bids, the source said, but a sale may not go through.

The automaker began looking at bids for a controlling stake in the lucrative financing business this year. A sale would be expected to fetch between $11 billion and $15 billion.

Representatives of KKR declined to comment, and a GM spokeswoman did not immediately return phone calls.

GMAC earned $2.8 billion last year, even as GM’s auto operations lost money.

Rating agencies have said that the best chance for GMAC to win an investment-grade rating would be a purchase by a highly rated “strategic” buyer, such as a large bank.

KKR has obtained financing from equity sources such as Wachovia Corp., Merrill Lynch & Co., General Electric Co. and Bank of Nova Scotia , the Wall Street Journal reported Wednesday. The bid is in cash and stock, the paper said.

KKR’s group has offered $4 billion in notes to help cover future liabilities but is not willing to assume them outright, fearing a loss if GM were to declare bankruptcy at some point, the report said. GM prefers that any buyer assume the majority of liabilities.

Juan Carrion, an auto credit analyst at UBS in London, said: “It’s a favorable headline initially. It seems there’s a high likelihood something will get done, and, on first look, maybe having two bidders may increase the size of the proceeds.”