By Dow Jones Business News,
January 13, 2014, 11:21:00 AM EDT
By Andrew R. Johnson and Telis Demos
Ally Financial Inc.'s board approved a measure that would restrict certain shareholders from increasing their stake
in the company ahead of expected moves by the U.S. government to exit its majority stake in the auto lender.
The so-called protective amendment would preserve tax benefits that "otherwise could be significantly limited if
the company were to experience an ownership change for U.S. federal income tax purposes," Ally spokeswoman Gina Proia
said Monday. Such actions may include "Ally's goal of eventually exiting" the government's Troubled Asset Relief
Program, she said.
The U.S. Treasury has said it could sell its 64% stake in the company via an initial public offering, private
transaction or sales of the company's assets. A spokesman for the agency declined to comment Monday.
Ally is looking to launch an IPO after the results of the Federal Reserve's annual bank "stress tests," or
Comprehensive Capital Analysis and Review, which will likely come in March, people familiar with the company's thinking
The Detroit-based company, which has had its capital plans rejected by the Fed in past stress tests, spent last
year preparing for an IPO by dispensing with its residential-mortgage unit and winning approval as a financial holding
company, which allows it to continue offering insurance products for auto dealers, an important business for Ally.
The IPO could come sooner, but the company will likely opt to wait until after the stress test because investors
would otherwise want to know the results, or would want to know whether Treasury knows of the results, the people
familiar with the company's thinking said. Treasury will be selling its stake in Ally in the IPO, according to
Ms. Proia said Ally continues to view an IPO as a "viable option" for the company, but she declined to comment on
The measure adopted by Ally's board would restrict transfers of the company's shares when such transactions would
increase ownership of Ally to 4.99% or more, according to a filing Monday with the Securities and Exchange Commission.
"This mechanism has been used by a number of other companies, including those that had TARP common equity
investments," Ms. Proia said.
The government remains Ally's largest shareholder after Treasury injected $17.2 billion into the company during the
financial crisis through the TARP program.
Massive losses and a mountain of litigation tied to Ally's subprime mortgage unit, Residential Capital LLC, forced
the company to seek government aid.
Ally, formerly the in-house lender for General Motors Co., has moved closer to exiting TARP, having repurchased $
5.9 billion in preferred shares owned by Treasury in November. Including that move, the company had repaid about $12.3
billion of its bailout as of December.
The company had planned to conduct an IPO in 2011 but scrapped that plan as legal woes surrounding ResCap grew.
ResCap filed for Chapter 11 bankruptcy protection in May 2012, which ultimately enabled Ally to strike a deal that
largely shields it from the firm's legal liabilities.
Ally also said it expects to report net income of $90 million to $110 million for the fourth quarter, which
includes a previously announced pretax charge of $98 million in connection with an auto-lending settlement with federal
Write to Andrew R. Johnson at firstname.lastname@example.org and Telis Demos at email@example.com
(END) Dow Jones Newswires
Copyright (c) 2014 Dow Jones & Company, Inc.