Creditors of bankrupt Residential Capital LLC asked a judge to let them probe, and possibly sue, bondholder trustees Wells Fargo & Co. (WFC) and U.S. Bank NA, a move the creditors say could net “hundreds of millions” of dollars.
When the mortgage company filed bankruptcy in May, it boosted the declared amount of collateral backing bondholder claims by $1.1 billion, to assets worth about $2.4 billion, the official committee of unsecured creditors said yesterday in court papers. ResCap, as the company is known, thus waived its right to challenge the bondholders’ claims to the collateral, creditors said.
“This is a classic situation in which a creditors’ committee is the only independent fiduciary that can properly act for the estates,” the panel said in court papers.
The collateral in dispute includes “restricted cash accounts” containing $39 million, the creditors’ committee said in its 785-page filing.
ResCap, based in New York, filed for bankruptcy with plans to sell most of its assets and to resolve legal claims related to mortgage-backed securities.
Reducing the amount of collateral backing the bonds might free up money that could go to unsecured creditors.
Nicole Garrison-Sprenger, a spokeswoman for U.S. Bank, didn’t immediately respond to an e-mail requesting comment on the filing. Lisa Westermann, a spokeswoman for Wells Fargo, declined to comment immediately.
ResCap’s 9 5/8 percent bonds due in 2015 rose more than 2 percent to 103.3 cents on the dollar, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
The bankruptcy case is In re Residential Capital LLC, 12- 12020, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
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