Residential Capital LLC won court approval of a mediator for talks with creditors opposing the bankrupt mortgage company’s $750 million settlement with parent Ally Financial Inc.
U.S. Bankruptcy Judge Martin Glenn in Manhattan agreed to appoint fellow judge James Peck to try to resolve a fight over how much Ally should be forced to pay to avoid a lawsuit over what the company did before it put ResCap into bankruptcy and other issues.
“There is going to need to be extensive negotiations and hard decisions,” Glenn said in court today. “The alternative is going to be close to nuclear war with a lot of deep pockets and high stakes.”
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 case is In re Residential Capital LLC, 12-12020, U.S. Bankruptcy Court, Southern District of New York (Manhattan).