Residential Capital LLC asked a judge to appoint a mediator for talks with creditors opposing the mortgage company’s $750 million settlement with parent Ally Financial Inc.
Unsecured noteholders represented by Wilmington Trust NA say Ally is offering too little to resolve claims that it stripped ResCap of valuable assets. A bankruptcy examiner is investigating the settlement offer and plans to deliver a report in April.
The request for a mediator comes after Wilmington Trust sent a letter to Ally’s board claiming Ally harmed creditors by taking away ResCap assets before the bankruptcy filing. The Nov. 26 letter, obtained by Bloomberg News, claims the assets were worth more than $10 billion.
“The proposed allocation to ResCap LLC of the $750 million contribution is far below Ally’s actual liability to ResCap LLC and the holders of the notes and does not provide any basis for a consensual resolution of Ally’s liability,” Wilmington Trust said.
ResCap said it will have to negotiate with creditors over the settlement and other issues in order to develop a consensual reorganization plan. Ally, a Detroit-based auto lender, is majority-owned by U.S. taxpayers.
“With so many disparate interests and perspectives among ResCap’s creditors, Ally is generally supportive of mediation in complex litigation matters should it aid in driving a prompt and fair resolution,” Gina Proia, a spokeswoman for Ally, said in a statement.
Kent Wissinger, a spokesman for Wilmington Trust, didn’t respond to a phone message seeking comment.
“It will be crucial to have a mediator educated on case issues and available to facilitate productive negotiations on plan issues that are paramount to reaching consensus,” ResCap said in papers filed yesterday in U.S. Bankruptcy Court in Manhattan.
ResCap also asked U.S. Bankruptcy Judge Martin Glenn to extend its exclusive right to file a reorganization plan to Feb. 28 from Dec. 20. Without an extension, creditors could file a competing plan.
ResCap and affiliates filed for bankruptcy in May with plans to sell ResCap’s servicing business, the fifth-biggest in the U.S. Ocwen Financial Corp. and Walter Investment Management Corp. won an auction for the unit in October with a bid valued at about $3 billion.
The case is In re Residential Capital LLC, 12-12020, U.S. Bankruptcy Court, Southern District of New York (Manhattan).