Lawyers for Ally Financial and ResCap, the bankrupt mortgage lender, are racing a Tuesday 11 a.m. deadline to reach a deal with creditors — or risk having a potentially damaging report made public, The Post has learned.
Bankruptcy Court Judge Martin Glenn yesterday gave all parties 24 hours to work out a settlement or he would release the report by Special Examiner Arthur Gonzalez, a source close to the situation said.
Taxpayer-owned Ally, ResCap and creditors of the home loan maker all have a lot to lose should the Gonzalez report be made public.
With much at stake, those close to the case told The Post that they expect a deal to be reached with all the three main creditor groups ahead of the clock running out.
“They are very close to reaching a deal,” one source said.
If there is no deal, the judge has promised to make public the Gonzalez report — which has already been delayed twice because an agreement was said to be close.
The Gonzalez report, among other issues, will decide whether Ally is responsible for ResCap’s losses.
That could determine how large a payout creditors would get — and how much Ally would be on the hook for.
Warren Buffett is the biggest holder of one of ResCap’s three main creditor groups. John Paulson is another.
If the Gonzalez report finds Ally and ResCap were never truly separate, Ally, which has said it is willing to commit $750 million to the bankrupt mortgage lender’s restructuring, could be on the hook for billions.
On the other hand, if he finds there was separation, the Paulson creditor group, for one, could come out with nothing.
Ally still owes taxpayers more than $11 billion of its $17.2 billion crisis-era bailout, the second-largest outstanding loan balance under the TARP rescue program.
The bank cannot sell itself or go public — which would increase the chances of taxpayers getting repaid — without ridding itself of ResCap liabilities.
The Buffett-dominated secured bondholder group is entitled to par but also wants post-bankruptcy interest of roughly $100 million.
ResCap might offer to pay that group par and set aside the $100 million and litigate that issue while it completes a reorganization, a source said.