Ally Reaches Creditor Deal, ResCap Examiner Lawyer Says
Ally Financial Inc. (ALLY) reached a deal to avoid creditor lawsuits related to the company’s bankrupt mortgage arm, Residential Capital LLC, said Howard Seife, a lawyer for the court-appointed examiner investigating the two companies’ pre-bankruptcy relationship.
Ally and the other participants in settlement talks have until tomorrow to file a court notice verifying that they have signed a term sheet, Seife said, following a hastily convened court hearing today in U.S. Bankruptcy Court in Manhattan.
Terms of the deal were not announced, Seife said. Ally has previously proposed paying $750 million to settle claims that creditors say are worth billions of dollars. Gina Proia, an Ally spokeswoman, declined to comment on the terms.
Ally, ResCap and the committee were in court to ask that the results of the examiner’s report be temporarily sealed while final details of the terms are documented, Seife said. The examiner, former U.S. Bankruptcy Judge Arthur J. Gonzalez, was prepared to file the report later today in open court, Seife said.
“The parties did represent in court that the economic terms of the deal have been agreed to,” Seife said. The parties said they expected to sign a term sheet, Seife said.
U.S. Bankruptcy Judge Martin Glenn agreed to keep the report sealed. Should Ally and the creditors fail to file a court notice verifying the deal has been signed, the report would be unsealed at about 11 a.m. tomorrow, Seife, with the law firm of Chadbourne & Park, LLP, said in an interview.
ResCap’s 9.625 percent bonds due in 2015 climbed 2.3 percent to 111 cents on the dollar at 3:41 p.m. in New York trading, according to Trace, the bond price reporting system of the Financial Industry Regulatory Authority.
ResCap, based in New York, filed for bankruptcy last year, partly to help it resolve lawsuits brought by investors that purchased mortgage bonds backed by home loans. The investors claimed the bonds lost value because many of the loans were bad. Such losses account for much of the $25 billion in unsecured debt that the creditors committee claims ResCap owes.
The case is In re Residential Capital LLC, 12-bk-12020, U.S. Bankruptcy Court, Southern District of New York (Manhattan).