Ally Financial will pay $2.1 billion to the ResCap bankruptcy estate to avoid lawsuits.
“Putting these issues behind us is in the best interest of our shareholders, employees and customers,” Ally CEO Michael A. Carpenter said in the statement.
Ally agreed to pay $1.95 billion to the ResCap bankruptcy estate, and insurance proceeds worth $150 million. This money will be added to the $4.5 billion ResCap managed to rise from selling its mortgage-servicing business, and given to creditors under the reorganization plan supported Ally Financial. Among the settling creditors are MBIA Insurance, ResCap noteholder Paulson & Co. and a group of securitization trusts, all suing the company for losses due to bad mortgages.
“We are supportive of the settlement that allows Ally to move forward,” said Dan Kamensky, a partner at Paulson, the largest holder of the unsecured bonds.
According to the accord, Ally is guaranteed full repayment of the $1.13 billion it claims ResCap owes it. This settlement is more than twice the $750 million Ally previously accepted to pay in 2012 when ResCap filed for bankruptcy, but creditors considered that sum to little.
The deal “signals an end to the litigation, infighting and potential ‘nuclear war’ in these cases,” ResCap bankruptcy attorney Gary Lee wrote in court papers filed today in Manhattan.