Yesterday, May 14th, 2012, Rescap filed for bankruptcy in the Southern District of New York (Case No. 12-12020). The Honorable Judge Martin Glenn will be overseeing the proceedings. Currently the markets on Rescap look like this:
- Recovery: 22-23.5
- CDS: 76.5-77.5
- 9.625% Bonds: 95-96
- Senior Unsecured Bonds: 22-24
- $600M admin and priority claims
- $9B of contingent liability claims (reps and warranties) -> Higher than the market was thinking
- $1.4B of other general unsecured claims
In addition, ResCap entered into a comprehensive settlement agreement between Ally and ResCap that is subject to confirmation by the bankruptcy court. I'll get into it in a bit more detail in a minute, but importantly it contains provisions to release Ally both from theoretical claims from ResCap and third-party claims.
The settlement agreement, which is subject to court approval, what it provides for Ally is first of all, the release of all claims between Ally and ResCap. Let me touch on that for a minute. Those of you who've heard me talk about two or three times have heard me repeatedly say, Ally and ResCap are two separate companies.
And ResCap's separability is ensured by the fact that historically it's been an SEC registrant, and the disclosures associated with that, but it has the Board of Directors with independent member. There are operating agreements that the various contractual contracts between, having to do with the servicing business are clearly contracts with ResCap not with Ally. And for all these and many other reasons, we believe that the liabilities of ResCap do not penetrate to Ally.
- Health Care Finance Business
- Resort Finance Business
- Canadian Lending Operation
- IB Finance
- US and UK broker-deal operations
- Model Home Finance Business
- Securities backed from Freddie / Fannie