Reuters: Bankruptcy News: UPDATE 2-Ally CEO says lender could withdraw bankruptcy payment

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UPDATE 2-Ally CEO says lender could withdraw bankruptcy payment Feb 5th 2013, 16:08 Tue Feb 5, 2013 11:08am EST * $750 million settlement is subject of dispute with creditors * ResCap mortgage unit filed for bankruptcy in May 2012 * 4th-qtr profit of $1.4 bln vs loss of $206 mln year earlier * 4th qtr helped by a $1.3 billion tax valuation allowance By Rick Rothacker and Tanya Agrawal Feb 5 (Reuters) - U.S. auto lender Ally Financial Inc could withdraw a $750 million settlement offer made to creditors of its bankrupt Residential Capital mortgage unit, CEO Michael Carpenter said on Tuesday, in a sign of increased tensions in the bankruptcy case. As part of ResCap's bankruptcy filing in May 2012, Ally agreed to make the payment in exchange for a release of any possible claims against the company. But in a letter sent to Ally's board in November, some creditors said the settlement is much less than Ally's actual liability and that the lender could face damages for stripping assets from ResCap. In an earnings conference call with analysts, Carpenter said Ally is "extremely confident that such claims are completely without merit." The lender hopes for a resolution in "the near term" but "if we have to go the litigation route we will," Carpenter added. The ResCap bankruptcy is part of Ally's plan to shed a mortgage business that saw losses from toxic subprime mortgages balloon during the financial crisis, leading to a series of bailouts by the U.S. government. Ally also reached agreements last year to sell its international operations in an effort to speed up repayment to taxpayers. The lender, which is 74 percent-owned by the U.S. Treasury, plans to focus on its U.S. auto lending and Internet banking businesses. But a delay in the ResCap bankruptcy case could trip up its recovery. On Tuesday, Ally said it posted a fourth-quarter profit, helped by a $1.3 billion tax benefit. The Detroit-based company, once the auto lending arm of General Motors Co, said it earned $1.44 billion in the fourth quarter, compared with a loss of $206 million a year earlier. Ally said the results include a $46 million loss from its ResCap mortgage unit, a $94 million pension expense and a $148 million charge related to an early repayment of debt. The company sold its European and Latin American auto lending operations to General Motors' financial arm, GM Financial, for about $4.2 billion in November. Total revenue at Ally's North American automotive finance unit rose 30 percent to $371 million from a year earlier. Link this Share this Digg this Email Reprints

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