Ally Financial Inc. (ALLY:US), the home and auto lender majority-owned by U.S. taxpayers, may be signaling plans to put its money-losing mortgage unit into bankruptcy, according to Fitch Ratings.
Ally extended the maturity of $2.1 billion in secured financing for the Residential Capital mortgage unit to May 14, according to a filing today from the Detroit-based lender. The accord replaces $2.6 billion of funding maturing today, including a $500 million unsecured credit line that wasn’t renewed, the company said. The short extension, as opposed to longer arrangements in the past, may mean ResCap’s fate will be decided in the next month, Fitch said in a report today.
“The short-term maturity extension could signal a potential resolution of Ally’s ownership of ResCap in the near future, possibly including a bankruptcy filing,” Fitch analysts led by Mohak Rao wrote. Their view is not supported by any “specific knowledge,” the report said.
Chief Executive Officer Michael Carpenter is searching for ways to repay U.S. bailouts exceeding $17 billion that left the Treasury Department with a 74 percent stake. Carpenter, who once predicted that a pending initial public offering could value Ally at $30 billion, later said the sale won’t happen until there’s progress on resolving the mortgage unit.
People with knowledge of the matter have said Ally is considering a plan to put ResCap into bankruptcy, and Ally included a discussion of the potential fallout in its prospectus for the IPO.
Ally’s spokeswoman, Gina Proia, said lengthening the maturities provides funding “while both companies continue to evaluate options related to the mortgage business.”
Also today, Ally said it would cut back on its purchase of loans backed by the Federal Housing Administration, Department of Veterans Affairs and Department of Agriculture from correspondent lenders, starting April 16, Proia said in an e-mailed statement.
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