Reuters: Bankruptcy News: UPDATE 1-Court appoints ResCap examiner; Berkshire raises bid

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UPDATE 1-Court appoints ResCap examiner; Berkshire raises bid Jun 18th 2012, 21:05 Mon Jun 18, 2012 5:05pm EDT * Berkshire had asked for examiner, raises its bid * Judge to consider sales plan procedures * Nationstar also raises bid to match Berkshire 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. 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 for about $4 billion to two buyers: Nationstar Mortgage Holdings and Ally. Berkshire Hathaway is seeking to overturn that process and buy some ResCap assets itself. One week after throwing its hat in the ring, Berkshire on Monday raised its offer for the mortgage loan operations by $50 million. Nationstar also raised its bid on Monday by $50 million, each putting their respective offers at $2.45 billion. Berkshire has said that some pre-bankruptcy financial transactions between ResCap and Ally were "potentially improper" in calling for the examiner appointment. 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. 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. BIDDING WAR Berkshire, a significant holder of ResCap's debt, proposed last week that it be the opening, or "stalking-horse" bidder for ResCap's mortgage loan operations. It also said it may be interested in buying some loans that ResCap is selling. Early on Monday, Berkshire raised its offer for the loan operations by $50 million in a bid to replace Nationstar as the minimum bidder for the business. Nationstar responded on Monday afternoon by increasing its own offer by $50 million and cutting its deal-related fees to Berkshire's level. Glenn was expected to weigh in Monday on whether to move forward with the current sales plan in which Nationstar and Ally Financial will anchor an auction in September, or allow Berkshire to take Nationstar's place. Nationstar's initial offer, worked out during months of pre-bankruptcy negotiations, was $2.4 billion for the mortgage servicing assets. On Monday, it cut its proposed break-up fee - which must be paid if it is beat out by another buyer - to $24 million from $72 million and tossed out its plans for expense reimbursement of up to $10 million. That leveled the field with Berkshire's offer, ResCap lawyer Larren Nashelsky of Morrison & Foerster said during the hearing. Other bidders are also stepping up. Ocwen Financial Corp expects to join the bidding for Residential Capital LLC's mortgage loan operations, its chief financial officer John Britti told Reuters in an interview recently. The Atlanta-based mortgage servicer could bid on its own but likely would work with partners, he said, adding that it expects to bid after a judge approves the sale procedures. In addition, Lone Star, an investment fund, reiterated during Monday's hearing that it was interested in the group of loans that ResCap is selling and would participate in an auction for those assets. Ally Financial has planned to be the stalking horse in that auction with an offer of $1.4 billion. Link this Share this Digg this Email Reprints

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