News Column

GM Buys Back Part of Finance Unit

Nov .23, 2012

Michae J. De La Merced

Until it can make an initial public offering Ally Financial is shedding assets overseas to raise cash in an effort to repay the U.S. government.

Ally Financial's international operations are about to find a new home -- with the lender's former parent, General Motors.

Ally agreed Wednesday to sell its European and Latin American businesses, as well as a share of a joint venture in China, to G.M.'s financial arm for about $4.2 billion.

Ally is raising money to help repay a bailout the U.S. government extended to the company when it was struggling under the weight of souring mortgages. The government aid for Ally was part of a 2009 bailout of the auto industry by the administration of President Barack Obama.

Ally has stabilized since then, largely by focusing on its online banking operations. But the U.S. government still owns 74 percent of the company's common shares and $5.9 billion worth of convertible preferred securities.

The Treasury Department has recovered about $5.9 billion from its investment in Ally thus far, largely by selling shares and receiving dividend payments.

Ally wants to go public, which would help it repay the government, but is waiting out what it calls unfavorable market conditions. Until it can make an initial public offering Ally is selling assets to raise cash. It sold a Mexican insurance division for $865 million and its Canadian arm for $4.1 billion.

The sale of its remaining international operations is its biggest divestment yet.

"Our goals were to find the best solution for each of the businesses, while also maximizing shareholder value, and we believe those goals have been achieved," Michael A. Carpenter, Ally's chief executive, said in a statement.

G.M., which sold Ally -- then known as GMAC -- six years ago, had long been considered a likely buyer of Ally's international businesses. The automaker is making the deal through G.M. Financial, a unit built up through its acquisition of AmeriCredit for $3.5 billion in 2010. Through the transaction announced on Wednesday, G.M. Financial will expand overseas. The operations being sold include auto finance units in Germany, Britain and Brazil with a total of $16.1 billion in assets.

"G.M. is entering the most aggressive rollout of new vehicles in its history, and this acquisition will make us an even more formidable competitor by ensuring that competitive financing is available to our customers and dealers around the world," Daniel Ammann, the automaker's chief financial officer, said in a statement.



Source: (C) 2012 International Herald Tribune


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