ResCap Judge Approves Bankruptcy Deal With Insurer FGIC
The judge overseeing Residential Capital LLC’s bankruptcy approved a settlement under which Financial Guaranty Insurance Co. will pay $253.3 million to investors and collect about $206.5 million from the failed mortgage company and its affiliates.
The deal would end FGIC’s attempt to collect as much as $5.5 billion the bond insurer claimed it was owed by ResCap and two related entities.
U.S. Bankruptcy Judge Martin Glenn in New York called the settlement “fair and equitable” and in the best interest of investors who purchased mortgage bonds insured by FGIC. The $253.3 million payment would cancel the insurance policies on the bonds.
ResCap, based in New York, has been settling disputes with creditors as it prepares for a hearing in November where it will ask Glenn to approve a plan to distribute billions of dollars to creditors. Unsecured creditors would get 36 percent of what they are owed under the plan, while debts backed by collateral will be paid in full.
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.
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 email@example.com