Ally to Pay ResCap $2.1 Billion to Settle Creditor Claims
By Steven Church – May 23, 2013 9:08 AM ET
Ally Financial Inc. (ALLY) agreed to pay $2.1 billion to avoid lawsuits by unsecured creditors of the auto-lender’s bankrupt mortgage unit, Residential Capital LLC, according to a court filing today.
Creditors who have agreed to settle include noteholder Paulson & Co., MBIA Insurance Corp. and a group of securitization trusts suing for losses related to bad mortgages written by ResCap.
The settlement doesn’t resolve claims against Detroit-based Ally that are not related to ResCap’s bankruptcy, including those brought by the Federal Housing Finance Agency and the Federal Deposit Insurance Corp., as receiver for certain failed banks.
ResCap, based in New York, filed for bankruptcy last year, partly to help it resolve lawsuits brought by purchasers of mortgage bonds backed by home loans. The investors claimed the bonds lost value because many of the loans were bad. Such losses account for much of the $25 billion in unsecured debt that the creditors committee claims ResCap owes.
The case is In re Residential Capital LLC, 12-bk-12020, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
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