By Andrew R. Johnson
Standard & Poor's Ratings Services raised Ally Financial
Inc.'s credit rating two notches to BB, citing the auto lender's
progress toward putting various legal issues behind it.
The ratings agency said Thursday the bankruptcy of Ally's
subprime-mortgage subsidiary, Residential Capital LLC, has helped
the company obtain a release from numerous mortgage liabilities
that had been an overhang for Ally.
"The upgrade reflects the company's release from potential legal
and financial liabilities stemming from its ownership of ResCap,"
Tom Connell, a credit analyst for S&P, said in a statement.
S&P also raised its ratings on Ally's senior unsecured and
secured debt two notches to BB, and its rating on the company's
subordinated debt two notches to B+.
A spokeswoman for Ally said the company was pleased by the
upgrade, which reflected the company's "transformation efforts" it
has completed this year.
Ally received a $17.2 billion bailout from the U.S. government
during the financial crisis as losses tied to ResCap's mortgage
businesses hammered the company. Litigation over soured mortgage
securities and foreclosure practices ultimately led ResCap to file
for Chapter 11 bankruptcy in May 2012.
In July, the U.S. Bankruptcy Court approved a $2.1 billion
settlement Ally reached with ResCap and the mortgage subsidiary's
creditors that shields the auto lender from most of ResCap's
liabilities. The court approved ResCap's liquidation plan
Wednesday.
Ally, the former financing arm of General Motors Co. (GM), has
focused its attention on repaying the remainder of its bailout,
which could ultimately lead to an initial public offering for the
company. Last month it repurchased $5.9 billion in preferred shares
owned by the U.S. Treasury Department, bringing the amount Ally
still owes the government to about $5 billion.
GM on Thursday said it sold its remaining 8.5% stake in Ally for
$900 million.
Write to Andrew R. Johnson at andrew.r.johnson@dowjones.com
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