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DETROIT---Auto financing and
banking company Ally Financial
took a big step toward exiting
US government ownership yes-
terday, announcing a deal to pay
taxpayers US$5.2 billion for pre-
ferred stock granted in a 2009
bailout during the financial cri-
Ally, the former financing arm
of General Motors Co, had to be
rescued when the economy and
auto industry nosedived, with the
government spending US$17.2
billion to save the company and
keep auto loans coming.
Under the deal, Ally also will
pay the government accrued div-
idends plus US$725 million for
the Treasury Department to give
up rights to convert the preferred
stock to common shares.
With the move, Ally will have
repaid roughly US$12 billion,
meaning the government is still
about US$5.2 billion in the hole
on the Ally deal.
In addition to the preferred
stock, taxpayers also own 74 per
cent of Ally's common stock.
There's hope that taxpayers will
get the rest of their money back
when the stock is sold, potentially
in an initial public offering.
Ally spokeswoman Gina Proia
gave no further details of when
an IPO or other stock sale might
take place but said it is still an
Ally filed paperwork for an IPO
in 2011 but delayed the sale until
its finances and the market for
such offerings improved.
"Ally has made great progress
in restructuring and strengthen-
ing its business in order to repay
the taxpayer, and we look forward
to continuing to work with the
company to recover the remain-
ing investment," Tim Massad,
assistant treasury secretary for
financial stability, said in a state-
The deal, reached on Monday
and disclosed yesterday in a filing
with the Securities and Exchange
Commission, still must be
approved by the Federal Reserve,
which must bless the capital
strength of Ally's banking unit.
In addition, Ally said it would
sell nearly 167,000 common
shares to unspecified investors
for US$1 billion in a private deal
to take place no later than
"These transactions are key
steps in Ally's journey toward
repaying the remaining invest-
ment by the US taxpayer," said
Ally CEO Michael Carpenter.
"We are encouraged by the
strong investor interest in the
company through the process to
raise the additional common
equity and believe it validates the
progress that has been made over
The private sale of common
shares will dilute the govern-
ment's stake in Ally from the cur-
rent 74 per cent to around 65 per
cent, Proia said.
Other Ally shareholders include
private equity firm Cerberus
Capital Management at 9 per
cent, a trust for General Motors
at ten per cent and some smaller
Ally has been preparing to
repay the government for the past
year, amassing cash by selling
assets outside the US.
In November, GM Financial,
General Motors' new financial
arm, bought Ally's European,
Chinese and Latin American auto
financing operations for US$4.25
A month before that, Ally sold
its Canadian operations to the
Royal Bank of Canada for US$4.1
billion and a Mexican insurance
business for US$865 million, giv-
ing it about US$9 billion in cash.
In May, Ally cut ties to its trou-
bled mortgage lending and serv-
icing subsidiary Residential Cap-
ital LLC, or ResCap, when the
subsidiary filed for bankruptcy
Toxic mortgages made by
ResCap caused most of Ally's
financial problems. ResCap has
since accepted a US$3 billion
buyout offer from a unit of
Ocwen Financial Corp.
Also in the SEC filing are
details of who would appoint
members to Ally's board of direc-
tors as stock changes hands.
The government, which now
appoints six of 11 directors, will
gradually lose seats as it divests
itself of Ally shares.
Proia and Treasury Department
spokesman Adam Hodge
wouldn't comment on whether
the government plans a gradual
sale of the shares instead of an
"The IPO continues to be a
viable option," Proia said. "We
can't comment any further at
this point." (AP)
Ally to pay govt US$5.2b for preferred stock
Eastman Kodak Co (EKDKQ.PK), once a mighty
photography pioneer, earned court approval on
Tuesday for a plan to exit bankruptcy as a much
smaller digital-imaging company.
The green light from US Bankruptcy Judge Allan
Gropper in New York puts Kodak on track to exit
bankruptcy in about two weeks.
"It will be enormously valuable for the company
to get out of Chapter 11 and hopefully begin to
regain its position in the pantheon of American
business," Gropper said.
Kodak, based in Rochester, New York, was for
years synonymous with household cameras and
family snapshots. It filed a $6.75 billion bankruptcy
in January 2012, weighed down by high pension
costs and a years-long delay in embracing digital
It has sold off assets, including its consumer-
focused operations, and will emerge from Chapter
11 to focus mainly on commercial products such as
high-speed digital printing technology and flexible
packaging for consumer goods.
It will mean a lower public profile for Kodak's
iconic name and its expected revenues, about $2.5
billion, are roughly half of what it had when it filed
for Chapter 11.
In bankruptcy, Kodak failed to obtain significant
value for its portfolio of patents, which experts said
was a key reason it had to sell core businesses and
reinvent itself. But the bankruptcy resolved a major
dispute with retirees over pensions, and it has forged
a restructuring plan that, while wiping out share-
holders, should pay secured creditors and second-
lien noteholders in full.
General unsecured creditors are likely to receive
a marginal payout in the neighborhood of 4 cents
to 5 cents on the dollar.
"This comes on a day when many are losing
retirement benefits, and many are finding that their
recovery as a creditor is just a minute fraction of
what their debt is," Gropper said. "But I cannot
decree a larger payment for creditors or any payment
for shareholders if the value is not there."
Kodak plans to emerge from bankruptcy as early
as September 3, its attorney, Andrew Dietderich,
said at a hearing on Tuesday in US Bankruptcy
Court in New York. (Reuters)
Kodak plan to exit
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