Ally said to be Shopping Mortgage Unit

by devteam February 9th, 2012 | Share

One of the financial institutions that arernparty to the reported settlement agreement with the attorneys general of thernmajority of the states is reportedly on the auction block.  According to Bloomberg News, Ally Financial isrntalking with private equity firms about selling its mortgage unit, ResidentialrnCapital LCC, through a pre-package bankruptcy. rn</p

Any sale of the company would berncomplicated by its recent financial history. rnThe company was founded as General Motors Acceptance Corporation (GMAC) inrn1919 by General Motors as an intermediary to provide financing for the purchasernof its autos.  Over the years it expandedrninto other types of lending and into real estate brokerage and adopted the acronymrnas its brand name.  </p

GMAC was hard hit by the housing crashrnand was one of the beneficiaries of Toxic Asset Relief Funds (TARP).   In addition to the company’s potential liabilitiesrn- a share of a reported $25 billion to be paid to the states in the abovernreferenced settlement deal represents merely one of the many suits arising outrnof the company’s role in the financial crisis – the U.S. Treasury has a largernstake in the parent company. According to the company’s website, the Treasury ownsrn73.8 percent; other large stakeholders at less than 10 percent each are GMrnTrust, Cerberus and affiliates, and third party investors.  In 2010, reportedly to distance the financialrnarm from the auto company, its name was changed to Ally.  </p

The company reported a fourth quarterrnloss on a $270 million charge to cover expected penalties from regulators.</p

According to Bloomberg, Ally hasrncontacted Fortress Investment Cerberus Capital Management, CenterbridgernCapital, and Leucadia National Corporation to see if they have any interest inrna purchase.  Bloomberg also said the company is seeking a sale inrnorder to limit its liability.  Thernpre-packaged bankruptcy would allow it to reach agreements with creditors andrnstakeholders before filing for court protection.

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About the Author


Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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