Ally Financial Inc. (ALLY)’s mortgage unit is in exclusive talks with Fortress Investment Group LLC (FIG) to sell itself through a prepackaged bankruptcy, according to a person familiar with the negotiations.
Fortress would buy the Residential Capital LLC unit through a so-called 363 sale, said the person, declining to be identified because the talks are private.
Ally, the home and auto lender majority owned by the U.S. government, would set aside an as yet undecided amount of funds to cover future liabilities at the unit, the person said. Ally’s payment would help ResCap weather losses including mortgage liabilities and may reach $2 billion or more, a person familiar with the discussions said in December.
A sale of ResCap would allow Ally to separate itself from mortgage litigation tied to private-label securitizations and pursue an initial public offering intended to repay the government’s $17.2 billion investment. Ally Chief Executive Officer Michael Carpenter, who once predicted that an IPO could value the company at $30 billion, said last month the IPO won’t happen until there’s progress on the mortgage business.
A prearranged bankruptcy would allow ResCap to reach an agreement with creditors and other stakeholders before filing, and would allow the buyer to leave behind liabilities. The U.S. owns 74 percent of Ally.
The New York Post reported the exclusive talks earlier today. Ally spokeswoman Gina Proia declined to comment, as did Fortress spokesman Gordon Runte.
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