ResCap creditors target cash from Ally asset sales -WSJ

Tue Nov 27, 2012 7:39am IST

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Nov 26 (Reuters) - A group of creditors of Ally Financial Inc's mortgage subsidiary is laying claim to cash from Ally asset sales that was intended to help repay the U.S. government, which funded a $17.2 billion bailout of the financing firm, the Wall Street Journal reported.

The creditors of mortgage firm Residential Capital LLC (ResCap) are eyeing more than $9 billion that Ally plans to collect from sales of its international operations, the business daily said.

Ally, which is 74 percent owned by the U.S. government, agreed to sell its European and Latin American auto lending operations to General Motors Co's financing arm General Motors Financial Co for about $4.2 billion last week.

The sale was part of Ally's efforts to speed up the repayment of bailout funds. The company is focusing on its U.S. business and has already sold operations in Canada and Mexico.

In a letter sent on Monday to Ally's board, the creditors question transfers made in 2009 from Residential Capital to Ally, the Wall Street Journal reported, citing people who have reviewed the letter.

The creditors said Ally stripped ResCap of most of its value when it transferred Ally Bank, a depository unit valued at $10 billion, to the parent company and asked the company to repay them before others receive proceeds from Ally.

Ally, the former financing arm of GM, confirmed a letter had been received and said the company disagreed with the creditors' claims, although it did not elaborate on the content of the letter.

"The letter from ResCap's unsecured creditors' committee is a predictable tactic. We strongly disagree with the allegations in the letter and believe the claims are wholly without merit," Ally spokeswoman Gina Proia said in an e-mailed statement.

Ally has maintained that it is insulated from ResCap's liabilities because of their distinct ownership structures.

The Wall Street Journal said a representative for the creditors' committee did not respond to a request for comment.

ResCap filed for bankruptcy in May and earlier this month a bankruptcy court judge approved the sale of its mortgage operations to Ocwen Financial Corp and Walter Investment Management Corp for $3 billion.