Mortgage lender Residential Capital filed a bankruptcy-exit plan
that would pay general unsecured creditors 36.3 cents on the dollar
and free government-owned parent Ally Financial Inc. from any more
obligations in the case.
In filings made Wednesday with the U.S. Bankruptcy Court in
Manhattan, ResCap took the next step toward shaking free of its
messy Chapter 11 case, a costly proceeding that has produced huge
asset sales, an historic settlement and a 1,900-page independent
examiner's report.
ResCap filed both its exit plan and disclosure statement, a
plain language reading of the plan. Those creditors, who received
court approval on a $2.1 billion settlement with ResCap and Ally
late last month, will receive different amounts of recovery based
on which ResCap related entity owes them money, but most unsecured
creditors will receive the 36.3 cents on the dollar.
"The Plan embodies a near global resolution of extensive
intra-Debtor and inter creditor issues, permits the distribution of
available proceeds to creditors, and is the best means to fairly
and efficiently resolve the Debtors' Chapter 11 Cases," lawyers for
ResCap and its official committee of unsecured creditors said in a
joint filing.
The filing of the plan was made possible after ResCap's
creditors reached the deal with Ally, which releases the
government-owned parent from additional liabilities in the case.
Retired U.S. Bankruptcy Judge Arthur J. Gonzalez concluded in his
highly anticipated examiner's report that Ally could have been on
the hook for as much as $3 billion in claims. A $750 million offer
to creditors made at the beginning of ResCap's bankruptcy case
would have been too low, Mr. Gonzalez said, a conclusion shared by
the creditors who fought for more.
Some creditors had threatened to sue Ally to hold it responsible
for ResCap liabilities, arguing ResCap existed solely for the
benefit of Ally. The settlement, though, came after all sides
agreed to allow Mr. Gonzalez's report to be filed confidentially as
to not blow up any potential deal. The report was released publicly
the day ResCap's bankruptcy judge approved the settlement.
The next major phase of ResCap's Chapter 11 case will be a
period during which creditors cast their votes on the plan. The
company, however, must first receive approval of the disclosure
statement at a hearing set for Aug. 21. A court hearing on the plan
itself is tentatively set for November.
ResCap, once the country's fifth-largest mortgage servicer and
10th-largest mortgage lender, filed for Chapter 11 protection in
May 2012 as litigation over soured mortgage securities mounted and
bond payments loomed. The move was intended to help Ally, which
isn't part of the bankruptcy, to sever itself from those issues so
it can focus on repaying the bailout it received during the
financial crisis.
During its bankruptcy, ResCap struck deals to sell
mortgage-servicing platforms and loan portfolios as a part of
bankruptcy auctions that generated $4.5 billion in proceeds.
(Dow Jones Daily Bankruptcy Review covers news about distressed
companies and those under bankruptcy protection. Go to )
--Andrew R. Johnson contributed to this article.
Write to Joseph Checkler at joseph.checkler@dowjones.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires