By Dow Jones Business News,
January 16, 2014, 01:06:00 PM EDT
By Andrew R. Johnson and Ryan Tracy
Ally Financial Inc. is another step closer to exiting the U.S. government's crisis-era bailout program after the
Treasury Department said Thursday it plans to sell $3 billion of the auto lender's shares.
The government said it will sell 410,000 shares of Ally at $7,375 a share in a private offering, shrinking the
government's stake to about 37% of Ally's common stock from about 64%.
The transaction is the latest in a series of developments that have put Ally in a better position to get out from
the government's thumb five years after the financial crisis.
"This is a very positive outcome for Ally and for the U.S. taxpayer, and the strong investor interest is a
testament to the significant transformation of the company," Ally Chief Executive Michael Carpenter said in a news
The Treasury said in a written statement it will continue to work with the company "to further wind down" its
remaining investment in Ally "through either a public offering, private sale of its common shares, or other
Heavy losses on subprime mortgages made before the financial crisis nearly led to the demise of Ally, one of the
country's largest auto lenders. The Detroit-based company, formerly known as GMAC, converted to a bank-holding company
in 2008 to participate in the Treasury's Troubled Asset Relief Program, allowing it to receive a $17.2 billion bailout.
Treasury said taxpayers will have recovered $15.3 billion of that amount following the private offering announced
A mountain of legal issues tied to its former subprime mortgage subsidiary, Residential Capital LLC, until recently
have stalled Ally's efforts to repay the government.
ResCap filed for Chapter 11 bankruptcy protection in May 2012, a move intended to help Ally sever itself from the
mortgage lender's legal woes.
A U.S. Bankruptcy Court approved ResCap's bankruptcy plan last year, the cornerstone of which was a $2.1 billion
settlement that shields Ally from ResCap's legal liabilities.
In addition, Ally also reached a settlement with federal regulators over auto-lending practices and was granted
financial holding company status by the Federal Reserve in December. The latter move allows the company to continue
selling insurance products to auto dealers, an important business for Ally.
Ally is looking to launch an initial public offering after the results of the Federal Reserve's annual bank "stress
tests," which likely will come in March, people familiar with the company's thinking have said.
The company had planned to conduct an IPO in 2011 but scrapped that plan as legal woes surrounding ResCap grew.
The Treasury's latest planned sale is part of a series of private transactions involving Ally shares.
In November, Ally said it sold 216,667 shares for $1.3 billion in a bid to boost capital levels. The company
initially planned to sell about $1 billion of stock but increased the size of the sale due to investor demand.
General Motors Co., Ally's former parent, also sold its remaining 8.5% stake in the company through a private
placement in December for $900 million.
The Treasury didn't disclose the identities of the buyers of its shares. An agency spokesman didn't immediately
respond to a request for comment.
An Ally spokeswoman said the buyers include a "diverse group of institutional investors."
Telis Demos contributed to this article.
(END) Dow Jones Newswires
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