Residential Capital LLC ( fka RDCC)

[Enterprising Investor]

Berkshire Offers to Buy ResCap Assets (6/11/12)

By MICHAEL J. DE LA MERCED

Berkshire Hathaway offered on Monday to buy most of Residential Capital, the bankrupt mortgage unit of Ally Financial, trying again to acquire the business.

In a filing in Manhattan bankruptcy court, Berkshire essentially offered to step in as the preliminary bidder for the mortgage origination and servicing business and a portfolio of loans that are both being put up for auction. That would allow the conglomerate to set the floor for other bids and give it more latitude to match other proposals.

R. Ted Weschler, a top lieutenant to the Berkshire chief Warren E. Buffett, said in the filing that the company would be willing to provide sweeter terms for both assets than the current stalking-horse bidders.

Berkshire would best the current bid by the Fortress Investment Group by reducing a break-up fee by about two-thirds, to $24 million, and forgoing any expense reimbursements. And it would pay about $50 million more for the loan portfolio than Ally itself is offering.

A ResCap spokeswoman declined to comment.

The emergence of other potential buyers was always expected by ResCap. While the initial bids by Fortress and Ally would reap about $4 billion for creditors, the mortgage unit’s management had been counting on other suitors to bid up the price.

ResCap’s Chapter 11 filing last month was a long-awaited step aimed at helping the parent company shed one of the most enduring weights around its neck. While Ally — once known as GMAC, the onetime financing arm of General Motors — has made some progress in rebuilding itself from the collapse of the housing market, its mortgage unit contributed to the lender’s failing of government stress tests this year.

By shedding ResCap, Ally is hoping to clear the path to an eventual initial public offering or sale to repay its taxpayer bailout. The Treasury Department, which has injected about $17 billion into the firm, owns a 74 percent stake and is still owed about $12 billion.

Executives at both Ally and ResCap had expected the Chapter 11 process to face challenges. But one of the most surprisingly vocal opponents has been Berkshire, which at one point owned some ResCap bonds.

Last week, Mr. Weschler moved to have the judge overseeing the case install an independent examiner.

http://dealbook.nytimes.com/2012/06/11/berkshire-offers-to-buy-rescap-assets/