Ally Financial, the home and car loan company, is shelving its initial public offering because of weak market conditions and impending fines due to its mortgage foreclosure practices, according to three people close to the situation.
Delaying the $5 billion offering would stymie the Obama administration's attempt to sell a big parcel of its 73.8% stake in the lender, acquired as a result of the government's bailouts of the financial and automotive sectors. In total, the government invested $17 billion in Ally in a series of rescues.
Ally, which declined to comment, was formerly the finance arm of General Motors (GM)and known as GMAC. It planned to file with regulators within days for an IPO by the end of June. People familiar with the preparations said there was a small chance it could be completed with a modest delay in late July but it was more likely to take place after the summer.
The choppy stock market is proving a barrier to the final phase of the US Treasury's exit from the slew of investments it acquired in the financial crisis. U.S. stock prices rose on Thursday but only after six successive sessions of losses.The return on the rescue of companies ranging from Citigroup (C) to General Motors has been better than expected and the exit faster. However, officials were frustrated last month in their hopes of selling a bigger chunk of a 92% stake in AIG (AIG) , the insurance group, finally cutting the holding to 77%.Ally has marketed itself aggressively to new customers, advertising competitive interest rates to rebuild a base of deposits. But its marketing to potential investors is being made more difficult by uncertainty over the scope of financial penalties to be paid to state attorneys-general and regulators over the shoddy paperwork that led to foreclosures across the country being halted.Talks between state and federal authorities have been dragging on for months with the discussion of the size of penalties for several large mortgage servicers including Ally ranging up to a total of $20 billion.Further complicating the situation, Ally has also been in the running for the U.S. arm of ING Direct (ING), the Dutch-owned online bank. General Electric (GE) and Capital One (COF) are the frontrunners to acquire the company.
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