Reuters: Bankruptcy News: UPDATE 1-Ally Financial posts loss on bankruptcy-related charge

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UPDATE 1-Ally Financial posts loss on bankruptcy-related charge Aug 1st 2012, 12:51 Wed Aug 1, 2012 8:51am EDT * Q2 loss $898 mln vs profit $113 mln a year ago * ResCap mortgage unit filed for bankruptcy in May * $1.2 billion charge included $750 mln settlement with ResCap By Rick Rothacker Aug 1 (Reuters) - Ally Financial Inc, the auto lender 74 percent-owned by the U.S. Treasury, reported a second-quarter loss as it took a charge of $1.2 billion related to the bankruptcy filing by its mortgage subsidiary. The Detroit-based lender on Wednesday said it lost $898 million after taking the previously disclosed charge, compared with a profit of $113 million a year earlier. Ally, previously known as GMAC, was once the auto lending arm of what is now General Motors Co. It received a series of government bailouts during the financial crisis. Ally's Residential Capital mortgage unit filed for Chapter 11 bankruptcy on May 14, a move that aims to protect the parent company from mortgage liabilities as it seeks to repay government bailouts. Profits in Ally's global automotive services unit increased 7 percent to $746 million in the quarter. Retail deposits in its Ally Bank unit climbed 24 percent to $30.4 billion. Total revenue fell 12 percent to $1.8 billion. The $1.2 billion charge included a $442 million writedown of Ally's equity investment in ResCap and $750 million for a proposed settlement with ResCap that releases Ally from possible legal claims. Ally in May also said it was looking to sell its international operations to speed up repayment of the $17 billion of government bailouts it received. The lender says it has paid the Treasury $5.7 billion so far, including preferred stock dividends, interest payments and proceeds from the sale of Ally's preferred securities. A bankruptcy court judge in June approved Nationstar Mortgage Holdings Inc as the opening bidder for ResCap's mortgage origination and servicing business, beating out an offer from Warren Buffett's Berkshire Hathaway Inc. Berkshire will be the opening bidder for a ResCap loan portfolio. Bids for both the loans and the servicing platform are due on Oct. 19, and an auction is set for Oct. 23. A bankruptcy court hearing at which the judge would rule on the sales is set for Nov. 5. Link this Share this Digg this Email Reprints

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