A report on Residential Capital LLC’s pre-bankruptcy deals with parent company Ally Financial Inc. will be finished in early May, about one month later than planned, a lawyer for the retired judge conducting the probe said.
Lawyers for former U.S. Bankruptcy Judge Arthur J. Gonzalez, ResCap’s bankruptcy examiner, received about 2 million documents to review at the end of January and early this month, later than expected, Howard Seife, an attorney for Gonzalez, said in court today. The examiner’s report will affect ResCap’s ability to develop a consensual reorganization plan, U.S. Bankruptcy Judge Martin Glenn said in federal court in Manhattan today.
“It is very important for progress in this case that the report be done in early May,” Glenn said.
In July, Glenn ordered a probe of the mortgage company’s proposal to settle legal claims against Detroit-based Ally that may be worth billions of dollars.
Berkshire Hathaway Inc., the holding company run by billionaire Warren Buffett, requested the investigation into ResCap’s proposal to accept $750 million from Ally to settle potential legal liability tied to mortgage-related securities.
At the time, Berkshire owned about $900 million of ResCap’s junior secured bonds and was trying to buy some of the company’s assets. Berkshire, based in Omaha, Nebraska, later sold the bonds and then won an auction for a portfolio of ResCap loans with a bid of about $1.5 billion.
Creditors have objected to the settlement and a related deal that would give investors an $8.7 billion claim in ResCap’s bankruptcy in return for them dropping potential lawsuits over mortgages that went bad.
The claim would give the investors the chance to try to collect as much as $8.7 billion, depending on how much money ResCap raises through asset sales. In October, the company auctioned the loan portfolio and its loan-servicing business for about $4.5 billion.
The case is In re Residential Capital LLC, 12-12020, U.S. Bankruptcy Court, Southern District of New York (Manhattan).