Ally Financial today announced several transactions that will make an eventual IPO public offering possible and repayment of some – but not all – of its taxpayer 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 certain 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.
“Ally has undergone a complete restructuring and transformation in recent years, from addressing its mortgage risk to further strengthening its leading automotive finance and direct banking franchises,” said Chief Executive Officer Michael A. Carpenter.