As the U.S. government converted $5.5 billion of preferred stock into common shares, Ally Financial Inc. is inching closer to reclaiming its independence. Ally is formerly the lending unit of General Motors.
In a statement issued by the department recently, the swap involves nearly half of the Treasury Department's preferred stock and enhances the U.S. taxpayers' stake to 74% of Ally's common shares from 56.3%.
According further to the statement, this move (like a planned sale of several trust preferred securities held by the U.S.) is meant to “accelerate Treasury's ability to exit its investment.”
The government hopes to recover its $17.2 billion investment linked to Detroit-based Ally as CEO Michael Carpenter prepares the company for an initial public offering.
Formerly known as GMAC Inc., Ally nearly collapsed during the global economic crisis as defaults on its home mortgages surged and credit markets shunned the company's debt.
Mirko Mikelic said that Treasury officials aim to “get out of their stake,” in the coming year. Mikelic, a senior money manager who helps watch over $14 billion of fixed- income assets at Fifth Third Asset Management in Grand Rapids, Mich., also said that it’s a “pretty good sign” for Ally that it can operate as a standalone entity.
A Treasury official said that the recent transaction normalizes the capital structure, helping the government with its exit strategy. [via autonews - sub. required]