Ally Financial Inc. (ALLY:US), whose home- mortgage business has been the subject of bankruptcy speculation, said the unit didn’t make a scheduled interest payment today on about $473 million of debt.
Residential Capital LLC missed the semi-annual payment on 6.5 percent notes due in 2013, according to a regulatory filing. The firm has 30 days before a default occurs, according to the filing. The missed payment is about $20 million.
ResCap was ranked among the largest originators of so- called subprime and Alt-A mortgages until record defaults led to losses. People with knowledge of the matter have said Detroit- based Ally may put ResCap into bankruptcy, and the parent company included a discussion of potential fallout from such a decision in a prospectus for its initial public offering.
“This means they may be seeing the light at the end of the tunnel,” said Jody Lurie, a corporate-credit analyst at Janney Montgomery Scott LLC in Philadelphia. “A resolution to ResCap is very likely to happen over the next month. If it does, there’s no point covering this payment because they’ll meet all their obligations in the bankruptcy filing.”
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 Ally stake. Carpenter, who once predicted that the IPO could value Ally at $30 billion, later said the sale won’t happen until there’s progress on resolving the mortgage unit (ALLY:US).
ResCap’s $2.12 billion of 9.625 percent notes due in May 2015 rose 1.5 cents to 86.5 cents on the dollar, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. ResCap has a junk grade from the three large rating companies.
Ally extended the maturity of $2.1 billion in secured financing for ResCap last week, until May 14. This extension was shorter than past adjustments, prompting analysts at Fitch Ratings to suggest the company was signaling bankruptcy plans.
“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 in the April 13 report. That view is not supported by any “specific knowledge,” the analysts wrote.
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