NEW YORK, May 23, 2013 /PRNewswire/ -- Ally Financial Inc. (Ally), along with Residential Capital, LLC (ResCap) and ResCap's major creditors, completed the next step in implementing the comprehensive settlement agreement and Chapter 11 plan. ResCap filed a motion seeking court approval of the plan support agreement in the bankruptcy proceedings, which includes announcement of the terms of the Chapter 11 plan in connection with the comprehensive plan support agreement.
As previously announced, under the settlement brokered by the court's mediator, the Honorable James Peck, ResCap and its major creditors agreed to support a Chapter 11 plan in ResCap's Chapter 11 cases that contains broad releases for the benefit of Ally. The plan includes releases of all claims between Ally and ResCap, including all representation and warranty claims that reside with ResCap, and all claims held by third parties related to ResCap that could be brought against Ally and its non-debtor subsidiaries, except for securities claims alleged against Ally by the Federal Housing Finance Agency and the Federal Deposit Insurance Corporation, as receiver for certain failed banks. The Chapter 11 plan terms also confirm that the ResCap estate has the responsibility for the costs and obligations associated with the foreclosure settlement with the U.S. Department of Justice and the Attorneys General, as well as the responsibility for all Consent Order directives originally addressed to ResCap.
As part of the plan, Ally will contribute $1.95 billion in cash to the ResCap estate on the effective date of the plan, as well as the first $150 million from insurance proceeds it expects to receive related to releases in connection with the plan. The agreement also requires that Ally receive full repayment of its secured claims, including $1.13 billion that is owed under existing credit facilities. The agreement and the plan are subject to bankruptcy court approval and certain other conditions.
"Reaching this comprehensive agreement enables Ally to turn the page on a tumultuous chapter in its history that was severely impacted by the issues in the mortgage industry," said Chief Executive Officer Michael A. Carpenter. "Putting these issues behind us is in the best interest of our shareholders, employees and customers."
Carpenter continued, "We are focused on moving forward and devoting our full attention and resources toward our leading dealer financial services and direct banking franchises. Ally holds leading market positions in these sectors, and further investing in these operations will enable the company to fully thrive.
"We also remain committed to repaying the remaining investment from the U.S. taxpayer. Ally has paid $6.1 billion to the U.S. Treasury to date and reaching closure on the ResCap matter is a critical step in successfully completing our strategic initiatives."
Ally expects to record a charge of approximately $1.55 billion in the second quarter of 2013 related to the plan and an increase in litigation reserves.
About Ally Financial Inc.
Ally Financial Inc. is a leading automotive financial services company powered by a top direct banking franchise. Ally's automotive services business offers a full suite of financing products and services, including new and used vehicle inventory and consumer financing, leasing, inventory insurance, commercial loans and vehicle remarketing services. Ally Bank, the company's direct banking subsidiary and member FDIC, offers an array of deposit products, including certificates of deposit, savings accounts, money market accounts, IRA deposit products and interest checking. Ally's Commercial Finance unit provides financing to middle-market companies across a broad range of industries.
With approximately $166.2 billion in assets as of March 31, 2013, Ally operates as a bank holding company. For more information, visit the Ally media site at http://media.ally.com or follow Ally on Twitter: @Ally.
SOURCE Ally Financial