GM's IPO Shows Ally Could Afford to Repay $17B Bailout
Ally Financial Inc., the recipient of more than $17 billion in U.S. aid, may be able to repay its bailout in full with a profit for taxpayers if General Motors Co. is right about the value of its stake in the auto lender, Bloomberg reported.
GM, Ally's former parent, pegged the value of its 6.7 percent holding at $1.14 billion, according to a prospectus for the automaker's initial public offering. That implies a $17 billion price for all of Ally's common shares and would make the 56.3 percent U.S. stake worth $9.6 billion. Taxpayers could come out ahead if the government sells its $14.1 billion of preferred securities in Ally, formerly known as GMAC Inc.
“The valuation of the equity looks realistic,” said Kirk Ludtke, senior vice president for CRT Capital Group LLC in Stamford, Conn. “They're getting close” to being able to fully repay the bailout, he said.
Ending U.S. assistance could ease the pressure on President Obama, who's facing calls to withdraw support from the private sector, and let Detroit-based Ally shed the stigma of a government bailout. The Congressional Oversight Panel, which acts as a watchdog for the Troubled Asset Relief Program, predicted a $6.3 billion to $10 billion shortfall from Ally last March, saying the government may “squander” bailout funds.
Ally CEO Michael Carpenter, 63, has said an IPO could happen as early as next year. GM's offering may come in November, people familiar with the matter have said.
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