By Tom Hals
May 10 Creditors of bankrupt Residential Capital
LLC are nearing a deal to settle billions of dollars of claims
against the mortgage lender's parent, Ally Financial Inc
, a development that prompted a delay in a
much-anticipated report on ResCap's failure.
A mediator overseeing talks between Ally and ResCap
creditors asked that an independent examiner postpone his report
on claims that Ally should be held responsible for up to $25
billion of ResCap liabilities, according to a court filing.
That report was expected to be published on Friday at noon.
The examiner's attorney said in a filing with Manhattan
bankruptcy court on Friday that the report will now be published
at 3 p.m. on Monday.
"The mediator and the parties to the mediation believe that
a short postponement in the filing of the report would assist
the mediation process," Howard Seife of Chadbourne & Parke, who
represents the examiner, said in the court filing.
Creditors of ResCap are pursuing billions of dollars of cash
that Ally had raised by selling its international business and
planned to use to repay the remaining $11 billion of a U.S.
ResCap creditors have said Ally, which is about
three-quarters owned by the U.S. government, could be on the
hook for up to $25 billion owed to them by ResCap.
The examiner, former Manhattan bankruptcy judge Arthur
Gonzalez, was appointed to investigate allegations of improper
activity before the ResCap bankruptcy, including claims that
Ally Bank was improperly transferred from ResCap.
Gonzalez also examined the pre-bankruptcy deals between
Ally, ResCap, Ally investor Cerberus Capital Management LP and
others, as well as the negotiations that led to Ally's initial
proposed settlement Of $750 million. ResCap creditors rejected
that offer as too low.
Reaching a deal is critical for Ally, which is struggling to
put behind it the mortgage lending business so it can focus on
its core U.S. auto lending business. It is also looking to repay
the U.S. government, which in 2008 bailed out the company,
formerly known as General Motors Acceptance Corp.
Ally and Kenneth Eckstein, an attorney for the unsecured
creditors of ResCap, did not immediately respond on Friday to a
request for comment.
THE $80 MILLION REPORT
Examiners are only appointed in a small number of bankruptcy
cases and their reports do not carry the weight of a court
However, the reports can upend a bankruptcy that is near
resolution as happened in the Chapter 11 of Tribune Co. The
newspaper publisher was bottled up in bankruptcy for two years
after an examiner found indications of fraudulent behavior in a
leveraged buyout that creditors blamed for the company's
Gonzalez's investigation has burned through more than $80
million of ResCap's money as his team interviewed more than 90
witnesses and reviewed 9 million pages of documents. Some
parties to the bankruptcy told Reuters there was a growing sense
his report might be so thorough that every party will be both
helped and hurt by his findings, lending support to a mediated
ResCap was once one of the largest U.S. subprime mortgage
lenders in the United States. It filed for bankruptcy in May
2012 as litigation over soured mortgage bonds mounted.