Ally Financial Repays $2.9B of Debt Issued Under FDIC Program (10/31/12)
By Andrew R. Johnson
Ally Financial Inc., which is 74% owned by the U.S. government, said Wednesday it repaid $2.9 billion of debt it issued under a financial crisis-era guarantee program by the Federal Deposit Insurance Corp.
The Detroit-based auto lender's move leaves $4.5 billion of debt outstanding that it issued under the FDIC's Temporary Liquidity Guarantee Program, which was intended to spur bank lending during the crisis. It plans to repay that amount in December.
The program "was a key contributor in Ally being able to continue offering financing options for thousands of auto dealers across the U.S. and millions of their customers during the financial crisis," Jeffrey Brown , senior executive vice president of finance and corporate planning for Ally, said in a statement.
The FDIC declined to comment on Wednesday.
The TLGP program is set to expire at the end of the year.
The repayment is Ally's latest move to shore up its business as it tries to focus on shedding non-core assets and exit government ownership. A major part of that effort has been stemming its exposure to the housing market.
In May, its mortgage subsidiary, Residential Capital, filed for Chapter 11 bankruptcy in a move intended to allow Ally to sever itself from billions of dollars of litigation over soured mortgage securities. ResCap last week announced asset sales as part of bankruptcy auctions that stand to generate about $4.5 billion for the subprime lender's estate.
Separately, Ally also said it may sell a $122 billion portfolio of mortgage-servicing rights not included in ResCap's bankruptcy. It also is selling international auto-lending, insurance and deposit businesses, which could help accelerate its repayment of a government bailout that topped $17 billion under the Troubled Asset Relief Program.
Ally will have repaid $5.8 billion when including a planned dividend payment to the U.S. Treasury Department in November.
Earlier this month, Ally announced deals to sell Canadian operations to Royal Bank of Canada (RY, RY.T) for $4.1 billion and its Mexican insurance business, ABA Seguros, to Swiss insurer Ace Ltd. (ACE) for $865 million. It is expected to sell operations in Europe and Latin America by the end of the year. General Motors Co. (GM), Ally's former parent, has bid on those assets, according to people familiar with the matter.
The sale of its remaining international operations and its mortgage-servicing portfolio could generate at least $4 billion more for Ally, Moody's Investors Service said in a report this week.
Ally was bailed out as part of the government's broader rescue of the auto industry. The company's primary business is providing financing to dealers and customers of GM, Chrysler Group LLC and other manufacturers and operating an online bank that offers deposit products to consumers.
-Alan Zibel contributed to this story.
Write to Andrew R. Johnson at andrew.r.johnson@dowjones.com
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