General Motors sells Ally preferred shares for $1 billion image

General Motors said Tuesday it will sell all of its shares of Fixed Rate Perpetual Preferred Stock, Series A, of Ally Financial Inc. in a registered public offering for a total of $1.0 billion.

According to the automaker, the transaction is expected to close in the next few days.
Executives have said the automaker is now exploring ways to bolster its wholesale financing, or floorplanning, through which dealers put cars on their lots.

“Today, we are taking another step forward in our strategy to strengthen and simplify the company’s balance sheet,” said Chris Liddell, vice chairman and chief financial officer.

The transaction will result in a book gain of $0.3 billion to be recorded in the first quarter of 2011.  Following the sale, GM’s investment in Ally Financial will consist of a 9.9 percent interest in Ally common stock.
GM owned Ally until 2006, when it sold a 51 percent stake for $7.4 billion to a group of investors led by Cerberus Capital Management LP.

The government owns 74 percent of Ally because of a bailout during the financial crisis. Ally is preparing for an IPO, which is expected to happen in the second quarter, to help repay the government.