(Corrects Nationstar description in final paragraph.)
Ally Financial Inc. (ALLY) bonds rose the most in three weeks after the New York Post reported Fortress Investment Group LLC (FIG) is in talks to buy Residential Capital LLC, the company’s mortgage division.
The largest U.S. auto lender’s $2 billion of 8 percent notes due November 2031 rose 1.6 cents to 111.25 cents on the dollar at 1:31 p.m. in New York, according to Trace, the bond- price reporting system of the Financial Industry Regulatory Authority. The yield fell to 6.94 percent from 7.08 percent.
Gina Proia, a spokeswoman for Ally, and Gordon Runte, a spokesman for Fortress, declined to comment on the reported sale.
The U.S. Treasury Department rescued Detroit-based Ally, originally known as GMAC, with a $17.2 billion bailout in 2008 after the firm was deemed crucial to the health of automakers.
The U.S. now holds a 74 percent stake in the company and $5.9 billion of its convertible preferred stock, according to a March 7 report from bond research firm Gimme Credit LLC.
ResCap would be sold in a bankruptcy court-administered deal, the New York Post reported. The unit faces at least 22 mortgage-linked securities lawsuits that threaten to take away profit from Ally.
ResCap has about $2.4 billion in debt maturing over the next three years, and had $390 million in unrestricted liquidity at year-end, Gimme Credit said in the report.
Most Active Bonds
Ally bonds are the most actively traded U.S. high-yield corporate securities today, with 48 trades of $1 million or more as of 12:59 p.m. New York time, Trace data show.
The cost to protect against a default by ResCap jumped to the highest in more than two months after the New York Post report. Credit-default swaps on the lender rose 2.2 percentage points to 59 percent upfront, according to data provider CMA. That means it would cost $5.9 million initially and $500,000 annually to protect $10 million of the mortgage unit’s debt from default for five years.
Swaps on Ally dropped 18 basis points to 414.8 basis points, meaning an annual cost of $414,800 for five years, CMA prices show.
Nationstar Mortgage Holdings Inc., the residential mortgage loan servicer controlled by Fortress, priced an initial public offering March 7 that raised $233.3 million, the Lewisville, Texas-based company said in a statement.
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