Ally Bank 2012 Annual Report Download - page 113

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1. Description of Business, Basis of Presentation, and Changes in Significant Accounting Policies
Ally Financial Inc. (formerly GMAC Inc. and referred to herein as Ally, we, our, or us) is a leading, independent, diversified, financial
services firm. Founded in 1919, we are a leading automotive financial services company with over 90 years experience providing a broad
array of financial products and services to automotive dealers and their customers. We became a bank holding company on
December 24, 2008, under the Bank Holding Company Act of 1956, as amended. Our banking subsidiary, Ally Bank, is an indirect wholly
owned subsidiary of Ally Financial Inc. and a leading franchise in the growing direct (online and telephonic) banking market.
Residential Capital, LLC
On May 14, 2012 (the Petition Date), Residential Capital, LLC (ResCap) and certain of its wholly owned direct and indirect subsidiaries
(collectively, the Debtors) filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court
for the Southern District of New York (the Bankruptcy Court). In connection with the filings in May, Ally Financial Inc. and its direct and
indirect subsidiaries and affiliates (excluding the Debtors) (collectively, AFI) had reached an agreement with the Debtors and certain creditor
constituencies on a prearranged Chapter 11 plan (the Plan). The Plan included a proposed settlement (the Settlement) between AFI and the
Debtors, which included, among other things, an obligation of AFI to make a $750 million cash contribution to the Debtors' estate, and a
release of all existing or potential causes of action between AFI and the Debtors, as well as a release of all existing or potential ResCap-
related causes of action against AFI held by third parties.
The Settlement contemplated certain milestone requirements that the Debtors failed to satisfy, including the Bankruptcy Court's
confirmation of the Plan on or before October 31, 2012. While the failure to meet this October 31 milestone would have resulted in the
Settlement's automatic termination, AFI and the Debtors agreed to monthly temporary waivers of this automatic termination through February
28, 2013. This waiver was not extended beyond this date, and therefore the Settlement has terminated.
On November 21, 2012, the Bankruptcy Court entered orders approving the sale of the Debtors' (i) mortgage servicing platform (the
Platform Sale) to Ocwen Loan Servicing, LLC and Walter Investment Management Corp. and (ii) “whole-loan” portfolio (the Whole-Loan
Sale) to Berkshire Hathaway Inc. under section 363 of the Bankruptcy Code, and not as part of the Plan as originally contemplated. The
Whole-Loan Sale closed on February 5, 2013, and the Platform Sale closed on February 15, 2013.
As of the Petition Date, institutional investors in residential mortgage-backed securities (RMBS Investors) issued by ResCap's affiliates
and holding more than 25 percent of at least one class in each of 290 securitizations agreed to settle alleged representation and warranty
claims against the Debtors' estates in exchange for a total $8.7 billion allowed claim in the Debtors' bankruptcy cases, subject to the
applicable securitization trustees' acceptance of the terms of the settlements (the RMBS Settlements). The RMBS Investors also signed
separate plan support agreements (PSAs) with the Debtors and AFI in support of the Plan at the time of entering into the RMBS Settlements.
To date, RMBS Investors holding more than 25 percent of at least one class in each of 336 securitizations have agreed to the RMBS
Settlements. These 336 securitizations have an aggregate original principal balance of approximately $189 billion (out of a total of 392
outstanding securitizations with an original principal balance of $221 billion). The RMBS Settlements are subject to Bankruptcy Court
approval, and the Bankruptcy Court has scheduled a hearing to consider such approval in late May 2013. The PSAs are not part of this
scheduled Bankruptcy Court hearing. A number of creditors have raised objections to the RMBS Settlements, and the trustees representing the
securitization trusts and AFI have filed statements in support of the Debtors' motion to approve the RMBS Settlements. Separately, the
Debtors have failed to meet several Plan milestones in their bankruptcy cases, each of which has given the RMBS Investors the right to
terminate the PSAs upon three business days advance written notice to the Debtors and AFI. The RMBS Investors have not given the Debtors
and AFI such a notice to date, but have the right to do so at any time. If the RMBS Settlements were not approved or the RMBS Investors
were to decide not to support any proposed plan, it could adversely impact the likelihood that any such proposed plan is approved by the
Bankruptcy Court. AFI continues to support the RMBS Settlements at this time.
On June 4, 2012, Berkshire Hathaway Inc. filed a motion in the Bankruptcy Court for the appointment of an independent examiner to
investigate, among other things, certain of the Debtors' transactions with AFI occurring prior to the Petition Date, any claims the Debtors may
hold against AFI's officers and directors, and any claims the Debtors proposed to release under the Plan. On June 20, 2012, the Bankruptcy
Court approved the appointment of an examiner and, subsequently, the United States Trustee for the Southern District of New York appointed
former bankruptcy judge Arthur J. Gonzalez, Esq. as the examiner (the Examiner). On July 27, 2012, the Bankruptcy Court entered an order
approving the scope of the Examiner's investigation. The investigation includes, among other things: (a) all material pre-petition transactions
between or among the Debtors and AFI, Cerberus Capital Management, L.P. and its subsidiaries and affiliates, and/or Ally Bank; (b) certain
post-petition negotiations and transactions with the Debtors, including with respect to plan sponsor, plan support, and settlement agreements,
the debtor-in-possession financing with AFI, the stalking horse asset purchase agreement with AFI, and the servicing agreement with Ally
Bank; (c) all state and federal law claims or causes of action the Debtors proposed to release as part of the Plan; and (d) the release of all
existing or potential ResCap-related causes of action against AFI held by third parties. In the Examiner's original work plan, the Examiner
estimated that his investigation and related report would be completed six months from approximately August 6, 2012. However, on February
7, 2013 the Examiner informed the Bankruptcy Court in the third supplement to the work plan that the investigation and related report will not
be completed until early May 2013.
On December 26, 2012, the Bankruptcy Court, in an effort to facilitate plan negotiations, entered an order appointing bankruptcy judge
James M. Peck, Esq. as mediator to assist the parties in resolving certain issues relating to the formulation and confirmation of the Plan. There
can be no assurance that the mediation process will continue or will ultimately lead to a successful agreement among the parties.
Table of Contents
Notes to Consolidated Financial Statements
Ally Financial Inc. • Form 10-K