Residential Capital LLC should lose exclusive control of its reorganization once a bankruptcy examiner finishes probing a deal the mortgage company cut with its parent,
The nation’s fifth largest residential servicer is in
ResCap, according to a report by Bloomberg, is seeking a nine-month extension of its exclusive right to file a reorganization plan that would settle legal claims related to Ally and mortgage-bond investors. The official committee of unsecured creditors says it’s too much time and is asking for a shorter period tied to the probe and assurances that Ally will negotiate on a new plan.
“To date, the debtors have failed to engage in any substantive discussions with the committee over the terms of a
ResCap, which also uses the trade name GMAC Mortgage, filed for Chapter 11 bankruptcy protection in May. It’s likely to be sold through an ‘asset transaction’ as opposed to a franchise deal. (The deal that it had cut with Ally, which involves the transfer of certain assets to the bank, is being reviewed by a court-appointed examiner.)
The creditors asked U.S. Bankruptcy Judge Martin Glenn to limit ResCap’s exclusive control over the bankruptcy process to 30 days after the examiner files a report or until March 1, whichever comes first.
ResCap has agreed to accept $750 million from Detroit-based Ally in return for dropping any legal claims against its former parent. The company has also proposed settling a fight over mortgage-backed securities by giving investors the right to pursue an $8.7 billion claim in bankruptcy.
Both proposals need Glenn’s approval.
