(Reuters) - Ally Financial is “absolutely not” looking to sell its core U.S. auto lending business as it seeks ways to pay back $12 billion it owes to U.S. taxpayers after a government-funded bailout during the financial crisis, the company’s CEO said Tuesday.
Ally, the former in-house financing arm for General Motors Co (GM.N), on Monday announced plans to sell some international operations at the same time that its Residential Capital mortgage unit filed for bankruptcy protection.
Monday’s actions give Detroit-based Ally some flexibility in finding ways to pay back the $12 billion, CEO Michael Carpenter said in a conference call with analysts on Tuesday.
The company could still pursue an initial public stock offering, find private-equity firms to buy out the stake owned by the U.S. Treasury, release capital or pursue acquisitions, Carpenter said.
“We will have created optionality and opportunity as a result of these steps,” he said.
Ally last year filed for an initial public stock offering, but shelved those plans after its mortgage woes mounted and the European debt crisis roiled markets. That has led to speculation that the company might have to sell itself as a whole or in pieces to pay back taxpayers.
Ally has repaid about one-third of the $17 billion it received from the U.S. government and expects to return another third after selling its international auto, banking and insurance operations, Ally has said.
GM, the largest U.S. automaker, is interested in buying Ally’s international operations, GM’s chief executive told Bloomberg on Monday.
UBS analyst Colin Langan said on Monday that GM could be interested in parts of Ally’s U.S. operations, such as its dealer wholesale and leasing units. GM could pay $7.6 billion for Ally’s international, dealer wholesale and lease operations, he said.
GM is “probably not” interested in acquiring Ally’s U.S. operations, CEO Dan Akerson told Bloomberg.
Ally’s recovery from the financial crisis has been dogged by losses and lawsuits tied to its Residential Capital mortgage unit, once a major subprime lender and profit center. As part of the bankruptcy filing, Ally reached a $750 million settlement with ResCap that executives said will release it from mortgage-related lawsuits and allow it to move forward.
As he has in the past, Carpenter emphasized that Ally and ResCap are separate entities, a potentially key issue during the bankruptcy court proceedings.
“We believe the liabilities of ResCap do not penetrate to Ally,” Carpenter said. “The purpose of the payment we are making is not because these claims concern us but frankly to put the whole issue behind us.”
As part of ResCap’s filing, Nationstar Mortgage Holdings Inc (NSM.N), which is majority-owned by Fortress Investment Group LLC FIG.N, struck a deal to buy substantially all the mortgage-servicing and related assets from ResCap for about $2.4 billion, including debt.
Ally also agreed to bid $1.6 billion for a portfolio of ResCap-owned mortgages. Carpenter said it is likely that Ally will be outbid.
As part of the bankruptcy plan, Ally’s banking subsidiary has also agreed to negotiate the potential sale of its mortgage servicing rights in conjunction with ResCap’s other asset sales, Ally said. Ally Bank’s mortgage servicing rights - the right to collect payments from borrowers - were valued at $1.3 billion at the end of the first quarter.
Reporting By Rick Rothacker in Charlotte, N.C.; editing by Jeffrey Benkoe and Matthew Lewis