Fortress Investment Planning ResCap Acquisition

BloombergrnNews is reporting that Ally Financial is in talks with Fortress InvestmentrnGroup to sell some assets from Ally’s mortgage unit.  According to what Bloomberg calls “threernpeople with direct knowledge of the matter,” Fortress would buy parts of thernResidential Capital (ResCap) unit, including some of its servicing business asrnpart of a ResCap bankruptcy filing.  </p

Ally is facing a number ofrnfinancing deadlines in March, and a bankruptcy filing has been expected, butrnthe pending deal with Fortress may delay the filing.  The company has allegedly been lining up aboutrn$2 billion to fund operations subsequent to the filing.  Bloomberg says that investors holding at least $800 millionrnin ResCap debt, including Paulson & Co. and Appaloosa Management LP, hadrnjoined together to oppose a bankruptcy filing and have since signedrnconfidentiality agreements with ResCap to get inside information on the salesrnprocess. Bloomberg saidrnFortress may pay more than $1 billion for the deal but it appears that it mayrnonly be bidding on a small portion of the company.</p

ResCap had assets valued at $16.8rnbillion at the end of 2011 including servicing rights valued at $1.2 billionrnand is one of the larger servicers of GSE backed mortgages.  Ally Bank, which changed its name from GMACrnin May 2009, has received government bailout funds totaling $17.2 billion. The U.S. Treasury Department holds arn74 percent state in Ally’s common stock and an additional $5.9 billion ofrnpreferred shares that must be converted into common stock by the end of 2016.  Bloomberg quoted Chief Executive OfficerrnMichael Carpenter as once predicting that an initial public offering couldrnvalue the company at $30 billion but then saying last month that the IPO won’trnhappen until there’s progress on the mortgage business.  </p

Fortress is a global investment managerrnwith approximately $43.7 billion of assets under management.   Its website said it specializes inrnasset-based investing in physical and financial assets ranging from real estaternand capital assets to financial assets secured by diversified long-term cashrnflows.  Among its assets is ownership of 77 percent of Nationstar MortgagernHoldings and Fortress could fold the Ally servicing operations into thatrncompany.</p

Bloomberg, which so far appearsrnto be the only media outlet reporting the story, said Fortress is being vetted by FanniernMae and Freddie Mac to ensure it can handle the servicing volume. Fortressrnapparently outbid companies such as Centerbridge Capital Partners LLC to enterrninto exclusive talks. </p

Allyrnwas one of four companies that failed to pass all of the Federal Reserve’srnstress tests because its common capital ratio fell short of the requiredrnbenchmarks in the Fed’s stress scenario.  Selling a portion of the ResCap assets mayrnmake it easier to meet the criteria when it resubmits its plan as it has saidrnit will do. 

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