Ally CEO Michael Carpenter may have to put the bank’s mortgage servicing unit ResCap into bankruptcy in the next three weeks according to a report by the New York Post.
A ResCap bankruptcy would deliver a blow to the Obama Administration who awarded the mortgage service bailout money totaling roughly $16 billion. The bank still owes the federal government $12 million and a bankruptcy would put tax holders on the hook. The U.S. owns a 74 percent stake in the company.
Just months ago, Ally and ResCap were doing well and were poised for a public offering which would have generated $30 billion. This was upset over worries that Ally may be faced overwhelming mortgage liabilities.
Ally has debt payments due on May 14th, but they don’t currently have the cash on hand to meet these obligations. This is often the case with companies that must hire bankruptcy attorneys to help them get protection from their creditors.
CEO Michael Carpenter has exhausted all other avenues the company could take to avoid bankruptcy. He has delayed the bankruptcy while he determines how much it will cost to retain bankruptcy lawyers and bankers to assist with restructuring, a source close to the matter told the Post. However, delaying a bankruptcy filing any longer could become more costly for Ally.
In troubled economic times many large corporations and small businesses alike are struggling to meet their debt obligations. When these businesses are no longer able to keep their heads above water, a qualified bankruptcy attorney can offer them solutions to their problems.