Ally Says $750 Million Contribution to ResCap Could Be Increased

Ally Financial Inc. (ALLY), the U.S.-owned auto finance firm, is still willing to contribute $750 million to ease the recovery of its Residential Capital unit from bankruptcy and said the sum could be bigger.

“Given the inherent uncertainty of the bankruptcy process, it is possible that the $750 million estimate could be increased or decreased in the future, but we are unable to estimate the amount of any potential modification,” Detroit-based Ally said today in its annual regulatory filing.

Ally made the offer when ResCap declared bankruptcy last year to cover costs of soured subprime home loans and insulate itself from legal claims. Chief Executive Officer Michael Carpenter said the payment was designed to “avoid the noise” and allow Ally to proceed with its own turnaround plans.

The settlement plan lapsed on Feb. 28, leading Ally to say in today’s filing that it may face substantial legal claims from ResCap’s bankruptcy with possibly significant costs.

Ally benefited from more than $17 billion in U.S. bailouts and plans to repay the funds by staging an initial public offering. Carpenter has put the idea on hold until after ResCap’s fate is clear. The U.S. owns 74 percent of Ally.

To contact the reporter on this story: Dakin Campbell in San Francisco at dcampbell27@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net