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Ally Financial Inc. announced today key strategic actions aimed at strengthening the company's longer term financial profile and accelerating repayment of the US Treasury's investment. The actions include the decision by the mortgage subsidiary, Residential Capital, LLC and certain of its subsidiaries (ResCap), to file Chapter 11, and the decision by Ally to launch a process to explore strategic alternatives for its international operations.
These actions will enable Ally to further invest in and grow its leading US based automotive services and direct banking franchises and be best positioned to return additional capital to the US taxpayer by year end.
ResCap filed voluntary petitions for relief under Chapter 11 of the US Bankruptcy Code. In connection with the Chapter 11 filing, ResCap announced it has reached agreement with certain of its key creditors, including Ally, on the terms of a prearranged Chapter 11 plan.
Ally Financial, Ally Bank and all other Ally entities are not part of the ResCap Chapter 11 cases and there will be no change or interruption to Ally's business operations as a result of ResCap's action. In addition, ResCap and its origination and servicing platform are expected to operate in the normal course during this process.
Michael A. Carpenter, Ally Chief Executive Officer, said, "The action by ResCap will enable Ally to achieve a permanent solution to its legacy mortgage risks and put these issues behind us. This action, along with pursuing alternatives for the international businesses, will allow Ally to focus 100 percent of its energies on further strengthening its already leading US auto finance and direct banking franchises."
Ally has paid approximately $5.5 billion to the US Treasury, which has enabled the taxpayer to recover about one-third of the investment made in the company. Upon successful completion of the announced strategic initiatives, Ally expects to have returned a total of two-thirds of the taxpayer's investment.
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