--Ally repurchased $5.9 billion of preferred shares from
Treasury
--Company has repaid $12.3 billion of its $17.2 billion
bailout
--Treasury says it will work with Ally on an IPO, private stock
sale or asset sales
By Andrew R. Johnson
Ally Financial Inc. has repaid more than two thirds of its $17.2
billion crisis-era bailout following a move on Wednesday to
repurchase $5.9 billion of shares from the U.S. Treasury
Department.
The move puts the government a step closer to exiting its stake
in the Detroit-based company, which struggled under the weight of
subprime mortgage losses during the financial crisis that almost
led to the firm's collapse.
"Taxpayers are now in a stronger position to maximize the value
of their remaining investment in Ally," Timothy Bowler, deputy
assistant secretary of the Treasury, wrote in a Treasury blog post
on Wednesday. He added that the Treasury "will work with Ally on a
public offering or private sale of its common shares or sales of
assets to complete its exit."
Ally Chief Executive Michael Carpenter has previously said an
IPO or private transaction could be options as the U.S. government
looks to exit its remaining stake in the company.
Ally on Friday said it expected to repurchase $5.9 billion of
preferred shares owned by the Treasury after the Federal Reserve
said it didn't object to revised capital plan from the company.
Including the buyback disclosed on Wednesday, Ally has repaid $12.3
billion of its $17.2 billion bailout, Mr. Bowler wrote.
"Looking ahead, we will be focused on taking steps to further
improve profitability, maintain strong core auto finance and direct
banking franchises and fully exit the Troubled Asset Relief
Program," Ally's Mr. Carpenter said on Wednesday.
The Fed in March rejected a plan Ally had submitted under the
regulator's stress tests of big banks, deeming its capital levels
would be too low to survive an economic downturn.
The move was a blow to the company, which has worked to dig its
way out of legal issues largely tied to its subprime-mortgage
subsidiary Residential Capital LLC, which filed for Chapter 11
protection from creditors last year. ResCap's Chapter 11 filing was
intended to sever Ally from mounting litigation over soured
mortgage securities and foreclosure practices.
In July, a U.S. Bankruptcy Judge approved a $2.1 billion
settlement Ally reached with ResCap and the subsidiary's creditors
that will help shield Ally from ResCap's legal liabilities. A
confirmation hearing on ResCap's plan to exit Chapter 11 is taking
place in court this week.
To boost capital levels, Ally said in August it would sell
shares through a private placement of common stock to about a dozen
investors and seek permission to repurchase the preferred shares
from Treasury. Ally said on Wednesday that it had completed the
private sale of 216,667 shares for about $1.3 billion. The move
reduced Treasury's ownership of Ally to about 64% from 74%.
The Treasury's Mr. Bowler is in line to manage the government's
crisis relief programs, succeeding Timothy Massad as Assistant
Secretary for Financial Stability, a Treasury spokesman said on
Wednesday. The position includes unwinding the government's
investments in banks under the Troubled Asset Relief Program.
Mr. Massad is President Barack Obama's pick to head the
Commodity Futures Trading Commission, though he must be approved by
the Senate for the position.
-Ryan Tracy contributed to this article.
Write to Andrew R. Johnson at andrew.r.johnson@dowjones.com
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