UPDATE: Ally Financial's ResCap Files Bankruptcy
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(Updated - May 14, 2012 7:18 AM EDT)
Residential Capital LLC, known as ResCap, a subsidiary of Ally Financial Inc.
and one of the country’s largest mortgage originators and servicers, today announced that its Board of Directors voted to file for Chapter 11 protection along with fifty (50) of its subsidiaries. ResCap’s mortgage origination, servicing and other business activities, conducted through its subsidiaries, including GMAC Mortgage, will continue to operate as the Chapter 11 proceeds.
ResCap, like others in the mortgage industry, has faced continuing industry challenges, rising litigation costs and claims, and regulatory uncertainty.
This Chapter 11 process is designed to:
As part of Ally Financial’s support for the Chapter 11 cases and the restructuring plan, Ally Financial and ResCap have reached a global settlement of potential claims each entity and its affiliates had against the other, which settlement will provide ResCap with substantial value. In the unlikely event that ResCap does not obtain confirmation of its proposed reorganization plan, ResCap will still seek to close the sales to Nationstar and Ally Financial.
In addition, ResCap has obtained support for a restructuring plan premised upon the sales described above from holders of ResCap’s junior secured notes holding a significant amount of the outstanding notes. Also, ResCap has obtained support from, and entered into a settlement agreement with, institutional investors in residential mortgage-backed securities issued by ResCap’s affiliates. At present, institutional investors holding more than 25% of at least one class in each of 290 securitizations have agreed to support the reorganization. These 290 securitizations have an aggregate original principal balance of approximately $164 billion. As a total of 392 securitizations, with an aggregate original principal balance of approximately
$221 billion, remain outstanding, it is clear that the ResCap reorganization has broad support among institutional investors. The settlements are subject to Bankruptcy Court approval.
Given the support of Ally Financial, the debtholders, and other constituencies, ResCap is hopeful that its restructuring plan will be approved by the fourth quarter of 2012. In conjunction with today’s announcement, ResCap will file a number of first day motions that are intended to allow it to operate in the ordinary course of business during the process.
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Residential Capital LLC, known as ResCap, a subsidiary of Ally Financial Inc.
and one of the country’s largest mortgage originators and servicers, today announced that its Board of Directors voted to file for Chapter 11 protection along with fifty (50) of its subsidiaries. ResCap’s mortgage origination, servicing and other business activities, conducted through its subsidiaries, including GMAC Mortgage, will continue to operate as the Chapter 11 proceeds.
ResCap, like others in the mortgage industry, has faced continuing industry challenges, rising litigation costs and claims, and regulatory uncertainty.
This Chapter 11 process is designed to:
- Permit ResCap to continue as a going concern during the reorganization process, and to continue to provide uninterrupted, high quality service to its mortgage customers and business partners;
- Permit ResCap to continue to originate new mortgage loans, service its more than 2.4 million consumer mortgage loans, and offer loan modifications that allow homeowners to stay in their homes;
- Permit the ResCap business, post-reorganization and under new ownership, to continue to play an important role in preserving home ownership, providing necessary financing for home ownership, and contributing to bringing increasing stability to the U.S. mortgage markets;
- Provide ResCap with the opportunity to maximize value for its stakeholders;
- Permit ResCap to address legacy litigation and other liabilities in a manner that is fair to creditors; and
- Preserve the existing jobs of ResCap’s employees, and contribute to the creation of additional jobs in the United States in the mortgage sector when ResCap’s business operations emerge from the reorganization process under new ownership.
As part of Ally Financial’s support for the Chapter 11 cases and the restructuring plan, Ally Financial and ResCap have reached a global settlement of potential claims each entity and its affiliates had against the other, which settlement will provide ResCap with substantial value. In the unlikely event that ResCap does not obtain confirmation of its proposed reorganization plan, ResCap will still seek to close the sales to Nationstar and Ally Financial.
In addition, ResCap has obtained support for a restructuring plan premised upon the sales described above from holders of ResCap’s junior secured notes holding a significant amount of the outstanding notes. Also, ResCap has obtained support from, and entered into a settlement agreement with, institutional investors in residential mortgage-backed securities issued by ResCap’s affiliates. At present, institutional investors holding more than 25% of at least one class in each of 290 securitizations have agreed to support the reorganization. These 290 securitizations have an aggregate original principal balance of approximately $164 billion. As a total of 392 securitizations, with an aggregate original principal balance of approximately
$221 billion, remain outstanding, it is clear that the ResCap reorganization has broad support among institutional investors. The settlements are subject to Bankruptcy Court approval.
Given the support of Ally Financial, the debtholders, and other constituencies, ResCap is hopeful that its restructuring plan will be approved by the fourth quarter of 2012. In conjunction with today’s announcement, ResCap will file a number of first day motions that are intended to allow it to operate in the ordinary course of business during the process.
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