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Ally Financial Selects 4 Banks For Stock Offering

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On: Wed, Feb 9, 2011 at 1:32PM | By: Sherry Christiansen


Ally Financial Selects 4 Banks For Stock Offering

Deciding who the most popular kids on the block are has been a time-honored tradition among high school students. Sadly, many of those popularity cliques live on well beyond the high school years. In the world of high finance, there are still variations of the “pick me!” type of games being played. The latest involves Ally Financial Incorporated, which is an auto and mortgage lender. Just like General Motors and Chysler, a marjority of the company is owned by the U.S. government. Ally has finally picked four “dates for the prom” in the form of the banks that will lead a planned initial public offering. The lucky winners are Citigroup, Goldman Sachs, JPMorgan Chase, and Morgan Stanley. What’s at stake for these banks? An IPO worth $5 billion. Clearly, that’s a game everyone wants to play.

Although this information is now “out there,” Ally and the four banks are keeping quiet. Even the U.S. Treasury Department (funded by taxpayer money) didn’t have anything to say to The New York Times when called on for comment. Those sources that did spill the beans want to remain anonymous because the bank picks have not been officially announced.

Thanks to bad mortgage loans, the government was forced to bail out Ally, not once, but many times throughout 2008 and 2009 to the tune of $17 billion in cold hard taxpayer cash. Quick to make amends, Ally says it has been turning around its operation. A look at their books reveals that the company recently posted its fourth consecutive quarterly profit.

In a shuffle of paperwork back in December, the feds agreed to transform $5.5 billion of its Ally preferred shares into common stock. This would mean a 73.8% stake in the lending group. By doing this, it will actually help the government sell some of those shares and ompletely divest itself from Ally. This is the same principle behind the other big bailouts: the government swoops in, props up the company, then sells those shares when the company can stand on its own.

A perfect example of this plan working is with GM. After the government sank around $50 billion into the Detroit automaker to save it from complete ruin, GM turned around and had a record shattering IPO back in November. The $23 billion that General Motors raked in helped pay back the feds and get the government closer to being out of the car making business.

Who is making all these choices? Citigroup and Goldman have been advising Ally on its restructuring. Our Treasury is being advised by Perella Weinberg Partners as to how to dump its stake in Ally without losing its proverbial shirt.




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