Through a series of purchases GMAC has reappeared in the auto lending as GM Financial.
General Motors Financial Company has acquired Ally Financial’s auto and financial services business in Brazil. Ally received approximately $611 million in proceeds related to the transaction.
The latest move continues GM’s plan to put back in place a GMAC-like operation, with many of the companies coming from Ally, which was GMAC and went bankrupt at the onset of the Great Recession because of its reckless home lending practices. A controversial U.S. taxpayer-funded bailout ensued, one that has not been paid back.
“As a result of the substantial progress on our strategic plans, Ally is in a much stronger position today to further strengthen its domestic franchises and advance its efforts to repay the U.S. taxpayer,” claimed Ally Chief Executive Officer Michael A. Carpenter.
GM Financial previously acquired Ally’s international operations in Europe and some other countries in Latin America. These international acquisitions, announced in November 2012, also cover partial ownership in a joint venture in China, which is awaiting regulatory and other approvals, but is still expected to close in 2014.
Upon the completion of all the international acquisitions, GM Financial will be present in 19 countries, lending to more than 16,000 dealers and providing auto finance products in markets that cover ~80% of GM’s worldwide sales volume.
At the end of August, Ally Financial announced several transactions that will make an eventual IPO public offering possible and repayment of some – but not all – of its taxpayer-funded bailout. Ally entered in agreements to place privately 166,667 shares of Ally common stock for an aggregate purchase price of $1 billion. In connection with the private placement, Ally also entered into agreements with the U.S. Treasury providing for the repurchase by Ally of all the outstanding shares of the Mandatory Convertible Preferred securities held by the U.S. Treasury and the termination of the U.S. Treasury’s existing share adjustment right.
If several complicated agreements and transactions go as planned, U.S. taxpayers will recover $12.1 billion or more than two-thirds of the bailout they subsidized. Ally has currently paid the U.S. Treasury $6.2 billion. If the IPO goes well, a full recovery is theoretically possible.
The agreement requires the funding of the private placement to take place no later than 30 November 2013, and the private placement is subject to conditions, including receiving a non-objection from the Federal Reserve to the so-called CCAR resubmission, because Treasury previously found its capital reserves inadequate.
The agreement also requires the repurchase by Ally of all outstanding shares of the MCP securities held by the U.S. Treasury, and the elimination of the share adjustment right. Ally will make a cash payment to the U.S. Treasury of $5.2 billion to repurchase $5.938 billion par value of MCP. A cash payment of $725 million will also be made to terminate the share adjustment right.
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