Ally Bank 2011 Annual Report Download - page 25

Table of Contents
Ally Financial Inc. • Form 10−K
downgrades, as well as the perceived creditworthiness of U.S. government−related obligations, could impact our ability to obtain, and the pricing with
respect to, funding that is collateralized by affected instruments and obtained through the secured and unsecured markets. As these conditions persist, our
business, results of operation, and financial position could be materially adversely affected.
Acts or threats of terrorism and political or military actions taken by the United States or other governments could adversely affect general economic
or industry conditions.
Geopolitical conditions may affect our earnings. Acts or threats of terrorism and political or military actions taken by the United States or other
governments in response to terrorism, or similar activity, could adversely affect general economic or industry conditions.
The U.S. Department of the Treasury (Treasury) holds a majority of the outstanding our common stock.
At February 28, 2012, Treasury held 981,971 shares of common stock, which represents approximately 74% of the voting power of the holders of
common stock outstanding for matters requiring a vote of the holders of common stock. In addition, as of the date hereof, Treasury holds 118,750,000
shares of Series F−2 Preferred Stock (which are convertible into shares of common stock in accordance with Ally's certificate of incorporation), with an
aggregate liquidation preference of approximately $5.9 billion.
Pursuant to the Amended and Restated Governance Agreement dated May 21, 2009, as of the date hereof, Treasury also has the right to appoint six
of the eleven members to our board of directors. As a result of this stock ownership interest and Treasury's right to appoint six directors to our board of
directors, Treasury has the ability to exert control, through its power to vote for the election of our directors, over various matters. To the extent Treasury
elects to exert such control over us, its interests (as a government entity) may differ from those of our other stockholders and it may influence, through its
ability to vote for the election of our directors, matters including:
• The selection, tenure and compensation of our management;
• Our business strategy and product offerings;
• Our relationship with our employees and other constituencies; and
• Our financing activities, including the issuance of debt and equity securities.
In particular, Treasury may have a greater interest in promoting U.S. economic growth and jobs than our other stockholders. In the future we may
also become subject to new and additional laws and government regulations regarding various aspects of our business as a result of participation in the
TARP program and the U.S. government's ownership in our business. These regulations could make it more difficult for us to compete with other
companies that are not subject to similar regulations.
The limitations on compensation imposed on us due to our participation in TARP, including the restrictions placed on our compensation by the
Special Master for TARP Executive Compensation, may adversely affect our ability to retain and motivate our executives and employees.
Our performance is dependent on the talent and efforts of our management team and employees. As a result of our participation in TARP, the
compensation of certain members of our management team and employees is subject to extensive restrictions under the Emergency Economic Stabilization
Act of 2008, as amended by the American Recovery and Reinvestment Act of 2009 (the ARRA), which was signed into law on February 17, 2009, as
implemented by the Interim Final Rule issued by Treasury on June 15, 2009 (the IFR). In addition, due to our level of participation in TARP, pursuant to
ARRA and the IFR, the Office of the Special Master for TARP Executive Compensation has the authority to further regulate our compensation
arrangements with certain of our executives and employees. In addition, we may become subject to further restrictions under any other future legislation or
regulation limiting executive compensation. Many of the restrictions are not limited to our senior executives and affect other employees whose contributions
to revenue and performance may be significant. These limitations may leave us unable to create a compensation structure that permits us to retain and
motivate certain of our executives and employees or to attract new executives or employees, especially if we are competing against institutions that are not
subject to the same restrictions. Any such inability could have a material and adverse effect on our business, financial condition, and results of operations.
Our borrowing costs and access to the unsecured debt capital markets depend significantly on our credit ratings.
The cost and availability of unsecured financing are materially affected by our short− and long−term credit ratings. Each of Standard & Poor's Rating
Services; Moody's Investors Service, Inc.; Fitch, Inc.; and Dominion Bond Rating Service rates our debt. Our current ratings as assigned by each of the
respective rating agencies are below investment grade, which negatively impacts our access to liquidity and increases our borrowing costs in the unsecured
market. Ratings reflect the rating agencies' opinions of our financial strength, operating performance, strategic position, and ability to meet our obligations.
On February 2, 2012, Fitch downgraded our senior debt to BB− from BB and changed the outlook to negative. Future downgrades of our credit ratings
would increase borrowing costs and further constrain our access to the unsecured debt markets and, as a result, would negatively affect our business. In
addition, downgrades of our credit ratings could increase the possibility of additional terms and conditions being added to any new or replacement financing
arrangements as well as impact elements of certain existing secured borrowing arrangements.
Agency ratings are not a recommendation to buy, sell, or hold any security and may be revised or withdrawn at any time by the issuing organization.
Each agency's rating should be evaluated independently of any other agency's rating.
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