Ally Throws ResCap into Bankruptcy, Sale to Nationstar Pending


The government controlled Ally Financial Monday morning said its board has voted to place Residential Capital LLC into Chapter 11 bankruptcy protection while it finalizes a deal to sell substantially all of its assets to Nationstar Mortgage for $4 billion.

In total, 50 ResCap affiliates are affected by the filing.

Ally noted that ResCap has secured $1.45 billion of debtor-in-possession financing from a group of banks led by Barclays Bank PLC.

The bank holding company said the filing will permit ResCap to continue originating new mortgages and servicing its $380 billion portfolio.

The legal manures also will: “Permit the ResCap business, post-reorganization and under new ownership, to continue to play an important role in preserving home ownership, providing necessary financing for home ownership, and contributing to bringing increasing stability to the U.S. mortgage markets; Provide ResCap with the opportunity to maximize value for its stakeholders; Permit ResCap to address legacy litigation and other liabilities in a manner that is fair to creditors; and Preserve the existing jobs of ResCap’s employees, and contribute to the creation of additional jobs in the United States in the mortgage sector when ResCap’s business operations emerge from the reorganization process under new ownership.”

As part of the filing, Ally and ResCap said they have reached a global settlement of potential claims each entity and its affiliates had against the other, “which settlement will provide ResCap with substantial value. In the unlikely event that ResCap does not obtain confirmation of its proposed reorganization plan, ResCap will still seek to close the sales to Nationstar and Ally Financial.”

As of Monday morning institutional investors holding more than 25% of at least one class in each of 290 MBS securitizations have agreed to support the reorganization.

“These 290 securitizations have an aggregate original principal balance of approximately $164 billion. As a total of 392 securitizations, with an aggregate original principal balance of approximately $221 billion, remain outstanding, it is clear that the ResCap reorganization has broad support among institutional investors. The settlements are subject to Bankruptcy Court approval,” Ally said.


Leave a Reply