Investors holding at least $800 million of secured bonds in Residential Capital Corp. (ResCap) have organized in the event the mortgage firm's parent company, Ally Financial, throws the company into bankruptcy.
The investor group is being represented by the law firm of White & Case. In a statement issued Monday, the firm said, “Ally, Ally Bank and Rescap are too intertwined to be easily unwound. A forced Rescap filing would be a big mistake and create significant litigation against Ally."
A spokeswoman for Ally had no comment on the action.
ResCap, which operates under the trade name GMAC Mortgage, ranks fourth among residential lenders, and fifth among servicers, according to figures compiled by ASR sister publication National Mortgage News and the Quarterly Data Report.
Ally Financial, a bank holding company, is majority owned by the U.S. government. A bankruptcy filing might prove embarrassing to the White House, but the Obama Administration did throw General Motors – which once controlled GMAC and its affiliates – into bankruptcy only to see the automaker's fortunes revive.
Ally had hoped to take ResCap/GMAC public last year but eventually scuttled the idea. ResCap/GMAC receives funding for its mortgage business from Ally.
In a recent Securities and Exchange Commission filing discussing its registration of demand notes, Ally mentions “risk factors” associated with the company but does not mention a potential bankruptcy filing for ResCap/GMAC.
