Treasury gives thumbs down to Ally IPO
Ally Financial Inc., which sopped up $17.2 billion in United States automotive bailout funds, must be cut up, claims the U.S. Treasury. Automotive News reports the Treasury has advised that auto finance company Ally be broken up and sold, ideally back to original owner General Motors. Bloomberg notes that this has much to do with speculation that an Ally Financial initial public offering would not be successful.
Ally and GMAC - There and back again
Ally executives were hoping an IPO would be the answer to their issues, which is why they would be disappointed if GM returned and took its ownership back. Ally Financial used to be called GMAC when General Motors owned it.
Ally's mortgage unit might be facing bankruptcy while it has a high cost of capital compared to other companies. The Treasury argues that these problems mean a successful Initial Public Offering is very unlikely. Ally Financial is certainly not stable enough to on, according to the Federal Reserve, as shown by stress test results.
Two or more pieces
Bloomberg News explained that the Treasury has a recommendation that Elliott Management Corp., a significant shareholder, agrees with. This would contain splitting Ally Financial into two pieces such as the online banking operation, which got over $28 billion in retail deposits in 2011, and the auto finance arm that is one of the largest in the business.
Ally spokeswoman Gina Proia told Automotive News via an email statement that the finance company is committed to fulfilling its ongoing mission of repaying its investors.
Due to the automotive bailouts of 2008 and 2009, Ally is mostly owned by working class individuals. In fact, 74 percent of the business is owned by taxpayers.
Ally's last year
In 2011, Ally Financial almost saw a lot of changes, such as going public. It also was almost bought out by Toronto-based Dominion Bank and GM in a joint buyout. Neither of those things ended up occurring.
Ally Financial financed 6.7 million GM and Chrysler automobiles, such as 2.4 million customer autos financing, since 2009, according to Proia. Ally has paid back $5.4 billion to the government since the bailout occurred.
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