Ally takes step toward 'free at last' with IPO
|Jim Henry is a special correspondent for Automotive News.|
NEW YORK -- It’s been a long time coming, but Ally Financial finally filed for its initial public stock offering today -- another step in a long process toward becoming a truly independent company.
Ally CEO Michael Carpenter said in an interview at the NADA convention in New Orleans in January that Ally was working on becoming “free at last” -- that is, free of both government and GM ownership.
Ally filed the first version of its IPO back in March 2011 but postponed the actual offering. Carpenter said in January that was largely because Ally was still encumbered with liabilities from its giant mortgage arm, Residential Capital LLC.
Ally allowed ResCap to go bankrupt in 2012, but the ResCap bankruptcy plan wasn’t approved in U.S. Bankruptcy Court until December 2013. In the same month, GM sold its last remaining 8.5 percent stake in Ally. Both moves helped pave the way for today’s IPO.
The IPO doesn’t take Ally all the way to zero government ownership, but it goes a long way toward taking Ally independent. The shares to be sold in the offering consist of 95 million shares belonging to the U.S. Treasury -- the result of a government bailout in 2008.
At an expected price of $25 to $28 per share, the government is expected to receive about $2.4 to $2.7 billion. Ally does not receive any of the proceeds from the sale, which should take place in the next few weeks.
Ahead of the IPO, the U.S. Treasury owns 37 percent of the company. After the shares are sold, it will still own about 17 percent -- or as little as 14 percent if demand for the shares is great enough, according to SEC documents. The U.S. Treasury has said in the past that ultimately it intends to exit completely, subject to market conditions and getting the best possible return for taxpayers.
Ally has already repaid the government $15.3 billion, or 89 percent of the government’s investment in Ally, the lender said.
The federal government came to the rescue of the company, then GMAC, in the last days of 2008, with subprime mortgages tanking, credit freezing up, and GM sliding toward eventual bankruptcy reorganization in 2009. GM sold majority control of GMAC back in 2006.
You can reach Jim Henry at email@example.com.