A federal judge told Residential Capital LLC, the bankrupt mortgage company indirectly owned by the U.S. government, to “rethink” part of its request for approval of a $1.45 billion loan designed to help fund the company’s operations.
U.S. Bankruptcy Judge James Peck in Manhattan said it was “unfair” for the company to ask him to make certain legal findings related to the loan on the first day of the company’s bankruptcy without giving him more details. After the company dropped part of its request for the judge to make a so-called true sale finding, Peck gave the company interim approval for the loan.
“For you to be doing what you are insisting on is fundamentally unfair,” said Peck, who is filling in today for another judge who will take over the case when he returns. “I’d like you to rethink what you are doing.”
The company was in court today seeking emergency approval to refinance two off-shore debt instruments in order to free up cash being held as collateral for the debt. Peck said he objected to ResCap’s request that he find the transaction involved a true sale without producing enough evidence.
Peck halted the hearing so lawyers could decide how to proceed on the loan request. After they returned, company attorneys agreed to drop that provision.
ResCap filed for bankruptcy today with plans to sell most of its assets to Fortress Investment Group LLC. The company listed assets of $15.7 billion and debt of $15.3 billion in a petition filed today in U.S. Bankruptcy Court in Manhattan. ResCap’s Chapter 11 filing is the biggest this year, based on liabilities, according to data compiled by Bloomberg.
The case is In re Residential Capital LLC, 12-12020, U.S. Bankruptcy Court, Southern District of New York (Manhattan).