ResCap Noteholders Get $125 Million More to End DisputeSteven Church and Bill Rochelle
Residential Capital LLC, the defunct mortgage company, agreed to increase by $125 million what it will pay a group of noteholders already getting about $1 billion, according to court records.
The noteholders, including hedge fund Aurelius Capital Management LP, were the last large creditors fighting ResCap’s liquidation plan, which is designed to resolve more than $100 billion in claims. The two sides will return to court Dec. 11 to ask U.S. Bankruptcy Judge Martin Glenn in Manhattan to approve the settlement and the plan incorporating it, according to a court filing.
Under the settlement, junior-secured noteholders would recover all principal and interest owed them at the time ResCap and its affiliates entered bankruptcy. The extra $125 million will end the noteholders’ demand for additional interest and fees.
The noteholders claimed that collateral for their loans exceeded the debt, entitling them to interest on their claims both before and after bankruptcy. Last month, ResCap, other creditors and the noteholders started a trial to determine how the claims should be treated under the liquidation plan.
Once the settlement is approved, the company can ask Glenn to approve its plan to distribute billions of dollars to creditors that ResCap raised by liquidating assets. The assets included a mortgage platform bought by Ocwen Loan Servicing LLC and Green Tree Servicing LLC for $3 billion.
ResCap, which is owned by Detroit-based Ally Financial Inc., filed for bankruptcy in May 2012 with plans to sell its mortgage unit and other assets. The company completed those sales this year, raising about $4.5 billion.
The case is In re Residential Capital LLC, 12-bk-12020, U.S. Bankruptcy Court, Southern District of New York (Manhattan).