(Reuters) - Ally Financial and creditors of the lender’s Residential Capital unit are in general agreement on a plan to put the mortgage subsidiary into bankruptcy in a deal that could speed up and ease the process, a person familiar with the matter said.
Details of the agreement are still being worked out, the source said on Tuesday. A deal with creditors would help the lender file for a pre-packaged Chapter 11 bankruptcy that expedites a reorganization.
ResCap, as the unit is called, has been considering filing for bankruptcy by May 14 when it must repay a portion of its debt. A filing could come as soon as Sunday.
Ally spokeswoman Gina Proia declined to comment.
Ally, formerly known as GMAC and which was bailed out by the U.S. government during the financial crisis, is 74 percent owned by the government and owes taxpayers about $12 billion.
ResCap has been pummeled over the last few years by mortgage problems and has been at the heart of Ally’s woes. A ResCap bankruptcy is seen as the best way for Ally, whose core business is auto loans, to move ahead.
Ally has been negotiating with a group of creditors who hold more than 45 percent of junior secured notes at ResCap, sources have said previously.
Billionaire Warren Buffett’s Berkshire Hathaway (BRKa.N) holds another 45 percent of the junior secured notes and also holds a significant portion of ResCap’s unsecured notes that mature in May, sources have said previously.
Ally has also been negotiating with Fortress Investment Group FIG.N to sell loans and the rights to collect loan payments and has been negotiating with bondholders to settle their claims.
Barclays Plc (BARC.L) has agreed to arrange a roughly $1.5 billion debtor-in-possession financing for operations during the bankruptcy, sources have said.
News of agreement with the creditors was earlier reported by Bloomberg.
Reporting by Paritosh Bansal and Soyoung Kim in New York and Rick Rothacker in Charlotte, N.C.; Editing by Tiffany Wu and Matt Driskill