Ally Financial Inc. can further reduce the Treasury's ownership stake in the company by selling all or a portion of its international auto lending units to General Motors Financial Co., Fitch Ratings said Wednesday.
Ally is trying to regain its footing as a lender in the post-crisis marketplace after putting its independent, subprime lending subsidiary Residential Capital into bankruptcy earlier this year. Troubles on the mortgage side of the house startled Ally in the wake of the financial crisis, prompting the lender to rely on a $17 billion bailout from the Treasury.
Nationstar is the stalking horse bidder for ResCap and notes the auction for mortgage servicing assets begins October 23. In its latest 10-Q filing, Nationstar said it is providing no assurances it will be successful in acquiring ResCap.The winning bidder will be decide by the Bankruptcy Court and subject to additional closing conditions.
Fitch is taking this into consideration.
"Fitch has previously highlighted that it will focus on the repayment of Ally's secured debt facility with ResCap, monitor the court's approval process of the proposed settlement agreement with ResCap and its creditors and assess the overall impact of these actions on Ally's capital and liquidity levels," said Fitch in a commentary piece. "In addition, Fitch will also monitor developments with respect to Ally's potential sale of its international operations."
Ally remains on negative ratings watch at Fitch with the ratings giant monitoring the ResCap bankruptcy process and planning to asses the impact of the final reorganization on Ally's capital and liquidity positions.
Fitch sees the potential sale of Ally's international auto finance arm as a move that creates quick cash, giving Ally enough liquidity to reduce the Treasury's 74% common equity stake in the company.
On the down side, a sale of Ally's international auto finance units would make GM more independent of Ally, potentially hurting the lender's U.S. auto financing volumes, which are heavily influenced by GM loans.
"If Ally is no longer providing international financing for GM, Fitch warns "this could impact how GM interacts with Ally in the U.S. market."
But for a company trying to remove itself from the crutches of Treasury ownership, Fitch sees the move as a potential boon with Ally able to refocus on the U.S. market and GM able to expand its financial presence internationally.