Reuters: Bankruptcy News: Court appoints examiner in Rescap bankruptcy

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Court appoints examiner in Rescap bankruptcy Jun 18th 2012, 18:44 Mon Jun 18, 2012 2:44pm EDT * Berkshire had asked for examiner * Judge to consider sales plan procedures * ResCap lawyer says Berkshire raises bid By Caroline Humer NEW YORK, June 18 (Reuters) - A U.S. bankruptcy judge said on Monday he would appoint an independent examiner to investigate the bankruptcy of home lender Residential Capital LLC, a move that was sought by Warren Buffett's Berkshire Hathaway Inc. Judge Martin Glenn said at a court hearing that "given the facts and circumstances of this case, the court concludes that appointment of an examiner is required and appropriate." An examiner, who is typically a bankruptcy lawyer, will now be named and should complete a report "expeditiously," Glenn said. In a bankruptcy, an examiner investigates allegations such as dishonesty, fraud, incompetence and mismanagement. Judges have previously appointed examiners in bankruptcy cases such as Lehman Brothers Holdings Inc and Dynegy Holdings, a unit Dynegy Inc. ResCap, the mortgage unit of Ally Financial, the former in-house financing arm of General Motors Co, filed for bankruptcy last month with a plan that included selling two groups of assets to two buyers: Nationstar Mortgage Holdings and Ally. Berkshire Hathaway is also seeking to buy parts of ResCap. It has said that the pre-bankruptcy financial transactions between ResCap and Ally were "potentially improper." Berkshire, a significant holder of ResCap's debt, has proposed that it be the opening, or "stalking-horse" bidder for ResCap's mortgage loan operations. It has also said it would buy some loans. Lawyers for ResCap and its unsecured creditors committee said the examiner is not needed because the process would duplicate an investigation already under way by the creditors committee. They also said it could slow down the company's reorganization plan. The sales plan includes plans for a September auction of the two businesses. Glenn was also expected to weigh in Monday on whether the current sales plan with Nationstar and Ally Financial can go forward. ResCap lawyer Larren Nashelsky of Morrison & Foerster said during the hearing on Monday that Berkshire and Nationstar had both raised their bids by $50 million on Monday, and that Nationstar had cut some merger fees, putting the two offers on equal ground. Link this Share this Digg this Email Reprints

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