Residential Capital LLC should lose exclusive control of its reorganization once a bankruptcy examiner finishes probing a deal the mortgage company cut with its parent, Ally Financial Inc. (ALLY:US), creditors said in court papers.
ResCap, as the company is known, is seeking a nine-month extension of its exclusive right to file a reorganization plan that would settle legal claims related to Ally and mortgage-bond investors. The official committee of unsecured creditors said that is too much time. It asked for a shorter period tied to the probe and assurances that Ally will negotiate on a new plan.
“To date, the debtors have failed to engage in any substantive discussions with the committee over the terms of a Chapter 11 plan,” the panel said today in court papers in U.S. Bankruptcy Court in Manhattan.
ResCap, based in New York, filed bankruptcy in May with plans to sell most of its assets and to resolve legal claims related to mortgage-backed securities. The deal that it had cut with Ally is being investigated by a court-appointed examiner.
The creditors asked U.S. Bankruptcy Judge Martin Glenn to limit ResCap’s exclusive control over the bankruptcy process to 30 days after the examiner files a report or until March 1, whichever comes first.
ResCap has agreed to accept $750 million from Detroit-based Ally in return for dropping any legal claims against its former parent. The company has also proposed settling a fight over mortgage-backed securities by giving investors the right to pursue an $8.7 billion claim in bankruptcy.
Both proposals need Glenn’s approval.
The bankruptcy case is In re Residential Capital LLC, 12- 12020, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
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