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Allstate Corp. (ALL), Deutsche Bank AG (DB), American International Group Inc. (AIG) and six other firms will represent unsecured creditors in the bankruptcy of mortgage lender Residential Capital LLC.
U.S. trustee Tracy Hope Davis named the companies to the committee, which is intended to ensure the interests of creditors and other stakeholders are given adequate consideration in bankruptcy proceedings, according to a court filing Wednesday night.
ResCap, the money-losing subsidiary of government-owned auto lender Ally Financial Inc. (GMA.XX), filed for Chapter 11 bankruptcy Monday as it faced upcoming loan maturities and millions of dollars of bond-related payments. It listed assets of $15.7 billion and liabilities of $15.3 billion in its petition.
Ally, the former in-house financing arm for General Motors Co. (GM), still owes $12 billion of a $17.2 billion bailout it received during the financial crisis as part of the government's broader rescue of the auto industry. It hopes to sever itself from costly litigation over soured mortgage investments that have been a drag on the rest of its business and prevented it from paying back the government.
Other members of ResCap's unsecured creditors' committee include Wilmington Trust, Bank of New York Mellon Corp. (BK), MBIA Inc. (MBI) and Financial Guaranty Insurance Co., or FGIC.
Several of the creditors, including MBIA, FGIC and Allstate, have filed lawsuits against ResCap, Ally and other affiliates claiming they lied about the quality of mortgages packaged into securities, resulting in billions of dollars of losses. MBIA and FGIC sold insurance on several of ResCap's MBS deals, which they claim included loans that didn't adhere to required underwriting standards.
Ally has struck agreements with ResCap and some ResCap creditors that would eliminate its liability in such claims, though the agreements are subject to court approval.
-By Andrew R. Johnson, Dow Jones Newswires; 212-416-3214; [email protected]