initial public offerings (IPOs) trading on American exchanges

Friday, June 10, 2011

Ally Financial delaying $6 bln IPO

Ally Financial Inc., the Detroit automotive financing firm formerly known as GMAC, has decided to delay its $6 billion initial public offering until at least September, the news agency Reuters reported.

  • Delaying IPO due to bad market conditions
  • IPO could now launch in late summer or fall
  • A six-week stock slump has caused Ally Financial Inc. to delay an initial public stock offering that had been scheduled for late June, two people briefed on the decision said Friday.
The $5 billion to $7 billion IPO by the former finance arm of General Motors was meant to repay the U.S. government for $17.2 billion in aid that Ally received during the financial crisis. The offering has been postponed indefinitely until markets improve, said the people, both of whom asked not to be identified because the decision has not been made public.
Ally would not get any money from the sale. It has returned $4.9 billion to the government through dividend payments and the sale of trust preferred securities. The government currently owns 74 percent of Ally's stock.
Ally and the U.S. Treasury have not said officially when the company would go public or how many shares the government will sell.
The Dow Jones industrial average closed below 12,000 on Friday for the first time since March. It was the market's sixth-straight weekly loss — the longest down series since the fall of 2002. Stocks have suffered this month as weak economic news dampened hopes for a quick economic recovery.
The Dow fell 172 points, or 1.4 percent, to close at 11,952.
Ally spokeswoman Gina Proia and Treasury spokesman Matthew Anderson would not comment on the delay, which was reported Friday by the Financial Times.
Ally, formerly known as GMAC Inc., makes loans to GM and Chrysler customers and finances dealer inventories of cars and trucks. The Detroit-based company received government aid in late 2008 as part of the Bush administration's assistance to the U.S. auto industry. The Obama administration invested additional sums in May and December 2009.
In addition to Ally common stock, Treasury owns $5.9 billion in preferred shares, which are convertible into common stock. For Treasury to break even on the $17.2 billion it gave Ally, it will have to sell the preferred stock for the $5.9 billion it is valued at and make about $6.4 billion from the sale of the common stock.
The company, which also had a mortgage lending division, Residential Capital LLC, had suffered from a strained credit market, the housing downturn and sliding demand for new cars during the recession. At the time, analysts had speculated that the company might have to file for bankruptcy protection or shut down without financial help.
Ally is among the lenders facing billions in potential fines stemming from government investigations into improper mortgage foreclosures. Federal financial regulators already ordered Ally and 15 others to reimburse homeowners who were foreclosed on improperly.
Citi, Goldman Sachs, J.P. Morgan and Morgan Stanley are managing the IPO. The four banks were also involved with GM's IPO last year.

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