Ally Financial’s chief executive made it very clear that the company is "absolutely not" looking to sell its core U.S. auto lending business in the wake of Monday’s announcement that its Residential Capital mortgage unit filed for bankruptcy protection.
In fact, “the actions position Ally very strongly for the future,” CEO Michael Carpenter said in a conference call on Tuesday.
The ResCap filing will accelerate Ally’s ability to repay the U.S. Treasury and reinforce the company’s focus on it auto lending and direct banking franchises, said Senior Executive Vice President of Finance and Corporate Planning Jeffrey Brown during the call.
ResCap is expected to emerge from bankruptcy by yearend. That move, along with the anticipated sale of Ally’s international auto, banking and insurance operations, should enable Ally to repay two-thirds of the $17 billion it owes the Treasury Department. Citigroup and Evercore Partners Inc. are advising Ally on the sale of its international businesses, the executives noted.
Looking ahead to 2013, Carpenter was upbeat. “We’ve unlocked the box and created optionality and opportunity as a result of these steps,” he said.
Could Ally consider an IPO at that point? Could a private equity firm buy the Treasury’s position? Could Ally release capital to pay down the Treasury debt? Could Ally consider an acquisition? Carpenter answered “Yes” to all of these scenarios.
Carpenter went on to say that the actions provide Ally with "tremendous" resources to take the auto unit and Ally Bank to "the next level," accelerating the company’s path to an investment-grade rating.
“We believe the combination of these activities is a very strong result and makes the prospects of the company sustainably brighter,” he said.