Ally's ResCap Deal May Pave the Way for Sale, IPO
In December, Bloomberg reported that Berkshire Hathaway (BRK.A) could take an equity stake in the unit, in a pre-packaged bankruptcy where bonds are converted to share holdings. With $500 million in Ally and ResCap bonds, Berkshire is one of ResCap's largest creditors. Overall, the unit's largest bondholder is Pacific Investment Management.
In January, a group of creditors representing $800 million worth of bonds formed a consortium to seek alternatives to a bankruptcy filing that may best preserve their claims. "The Rescap Creditor Group is concerned with media reports that assert that Ally may attempt to abandon Rescap without taking responsibility for Rescap's liabilities," said the creditors in a Jan. 9 statement. "A forced Rescap filing would be a big mistake and create significant litigation against Ally," they added.
To be seen is if the reported sale would get support from the creditor group; however, with strategic value to Ally Bank's deposit taking and auto lending businesses and some uncertainty removed from its mortgage unit, asset sales could be a way for the Treasury to have its loans repaid.
If Ally Bank sells ResCap in bankruptcy, watch for the likes of Wells Fargo and General Motors to begin circling its other assets.
-- Written by Antoine Gara from New York.