MINNEAPOLIS – The federal government is getting ready to sell more than half of its remaining stock in Ally Financial in a public offering that might raise enough money to pay back the rest of its taxpayer bailout.
The sale could raise as much as $3.06 billion. That plus the $15.3 billion the government has already recouped would make taxpayers whole for the $17.2 billion bailout that began in 2008.
However, whether or not that happens will be determined by investor appetite for owning part of a company that is still shoring up its finances.
Ally was known as GMAC Inc. at the time of its bailout during the financial crisis. The company had been the auto lending arm for General Motors. But it was nearly wrecked by bad subprime mortgages made by its Residential Capital unit.
Last May, Ally cut ties to ResCap when the subsidiary filed for bankruptcy protection. Its assets were auctioned for $3 billion in October.
Ally has also been selling off auto finance operations in Canada, Mexico, and overseas. The sales and ResCap move have transformed Ally into a company mostly focused on U.S. auto lending and banking.
Ally doesn’t have a network of bank branches. To get money to lend out, it offers certificates of deposit and also takes portions of deposits that are pooled by other financial institutions. Its $8.2 billion in so-called brokered deposits at the end of the year amounted to 18 per cent of its total deposits. One of Ally’s risks is that rising interest rates could make those harder to get, the company said in its Securities and Exchange Commission filing on Thursday.
The Treasury plans to sell 95 million shares for $25 to $28 each, the filing said. That would raise $2.38 billion to $2.66 billion.
Treasury also granted the offering’s underwriters — Citigroup, Goldman, Sachs & Co., Morgan Stanley and Barclays — a 30-day option to buy up to an additional 14.3 million shares to cover possible additional demand. That would raise up to $399 million more, boosting the overall proceeds as high as $3.06 billion. None of that money goes to Ally.
The offering would leave the government owning another 68.1 million shares if underwriters buy their allotment.
Stock in Ally, a bank holding company based in Detroit, is expected to trade on the New York Stock Exchange under the symbol “ALLY.”
AP Business Writer Bree Fowler in New York contributed to this report.