Ally Financial Inc. (ALLY:US), the bailed-out auto and home lender, confirmed that its Residential Capital unit is considering bankruptcy and estimated its own loss from the filing could range from $400 million to $1.25 billion.
“Market deterioration has led to fewer sources of, and significantly reduced levels of, liquidity available to finance ResCap’s operations,” Detroit-based Ally said today in its quarterly filing (ALLY:US) with securities regulators. The parent company and its money-losing mortgage unit are discussing a range of options for ResCap, which “may include a reorganization under bankruptcy laws, which ResCap is actively considering.”
Speculation has swirled that ResCap would seek court protection (ALLY:US) from creditors to advance Ally Chief Executive Officer Michael Carpenter’s plan to repay more than $17 billion in U.S. bailout funds. Carpenter, who once predicted that a pending initial public offering could value Ally at $30 billion, later said the sale won’t happen without progress on resolving the mortgage unit.
The bailout left the U.S. Treasury Department holding a 74 percent stake in Ally. The company reported this week that first-quarter profit more than doubled to $310 million as mortgage operations improved.
To contact the reporter on this story: Rick Green in New York at email@example.com
To contact the editor responsible for this story: David Scheer at firstname.lastname@example.org