ResCap Files Reorganization Plan, Disclosure Statement
Residential Capital LLC, the bankrupt mortgage company, filed a reorganization plan estimating unsecured creditors will recover about 36 percent of what they are owed, while debts backed by collateral will be paid in full.
In a disclosure statement written to help creditors decide how to vote on the plan, the New York-based company provided recovery estimates for unsecured creditors owed $2.15 billion and junior secured noteholders owed $2.22 billion.
The plan is based on a $2.1 billion settlement with ResCap’s parent, Ally Financial Inc. (ALLY), and creditors, including mortgage bond investors who blame both companies for their losses.
Leaving those creditor complaints unresolved “would have led to years of costly litigation and resulted in significant uncertainty and delays in distributions to creditors,” ResCap said in the disclosure statement, filed yesterday in U.S. Bankruptcy Court in Manhattan.
In return for paying $2.1 billion, Detroit-based Ally will win immunity from those claims should the settlement win final approval from U.S. Bankruptcy Judge Martin Glenn. Glenn will consider approving the deal as part of ResCap’s reorganization plan.
ResCap has proposed that creditors who are not being paid in full be given until October to vote on the plan. Under the U.S. Bankruptcy Code, Glenn must take those votes into consideration when deciding whether to approve the plan.
The case is In re Residential Capital LLC, 12-bk-12020, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
To contact the reporter on this story: Steven Church in Wilmington, Delaware at firstname.lastname@example.org