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Ally Said to Plan Share Sale For Late Second Quarter

February 8, 2011
3 min to read


Ally Financial Inc., the automobile and home lender majority owned by the U.S. government, plans to sell shares to the public late in the second quarter, according to two people with direct knowledge of the matter.


The initial public offering may come as soon as late May said one of the people, who declined to be identified because the IPO’s timing isn’t public. Last week, Ally chose Citigroup Inc., Goldman Sachs Group Inc., Morgan Stanley and JPMorgan Chase & Co. to underwrite the sale, according to a person with direct knowledge of the matter, reported Bloomberg.

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Chief Executive Officer Michael Carpenter, 63, is setting the stage for the government to begin exiting its 74 percent stake. The U.S. Treasury Department made the investment as it provided Ally with three rounds of aid totaling $17.2 billion.


Investors’ demand for the stock may be high because the business is profitable and strong used-car prices are reducing the risk of losses on repossessed cars, said Maryann Keller, founder of a self-named consulting firm.


“Investing in a large auto lender is a no-brainer,” said Keller, whose firm is based in Stamford, Connecticut. “This recession proved that people pay their car loans before they pay their mortgage. But they will have to explain how they will grow and what their relationship with GM is going to be.”


Ally was formerly known as GMAC Financial Services and served as the captive lending arm of General Motors Co.’s predecessor. The lender returned to profitability last year with $1.08 billion in net income after five straight quarterly losses and a $10.3 billion deficit in 2009.


Ally made more new-car loans than any other lender last year, according to Experian Automotive, a Costa Mesa, California-based firm that tracks auto-lending data. The company originated $23 billion in new-car loans last year, a 60 percent increase from 2009.

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GM sold 51 percent of GMAC to Cerberus Capital Management in 2006 to raise cash. The Treasury Department first provided capital to GMAC in 2008 as the lender’s ResCap mortgage arm posted $9.1 billion in losses in two years.


The Treasury made its third capital infusion in December 2009, capping a total aid package of $17.2 billion. Cerberus’s stake is now 7.8 percent, while GM owns 4 percent directly and an additional 5.9 percent in a trust. Other investors own 8.5 percent, according to Ally’s website.


Under the Treasury’s ownership, Ally has returned to health and has been increasing its business with GM and Chrysler Group LLC. Ally financed 38 percent of GM’s new-car loans last year, up from 28 percent in 2009. Its share of Chrysler’s new-car loans grew to 45 percent last year from 9 percent in 2009.


Ally’s mortgage unit made $663 million last year after losing $6.3 billion in 2009.


One of Ally’s challenges will be telling investors how it will compete with GM’s financing efforts following its October acquisition of subprime lender AmeriCredit Corp., Keller said.

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“Once GM bought AmeriCredit, they made it clear that their dealers would be doing less business with Ally,” Keller said. “That’s the question that Ally has to answer in an IPO.”

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