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10 Once-Bankrupt Companies Primed for a Comeback (Update 1)

9. Ally Bank

Once the auto-finance arm of General Motors (GM), Ally Bank received multiple bailouts during the financial crisis totaling $17 billion, which represented a big chunk of the auto industry bailout.

Still 73.8% owned by the U.S Treasury Department, Ally Bank filed papers for an initial public offering in March 2011, which Detroit News said could be in the $6 billion range. However, problems at the company's insurance unit called ResCap have made an initial public offering look less likely, according to February reports from Reuters that indicate the company is now considering an outright sale.

Analyst estimates of the value of Ally Bank provide valuable insight for investors, should the Treasury decide to go ahead with a share sale. A $6 billion share issue would also be one of the largest IPO's, potentially larger than the much hyped Facebook listing.

The company is split into three units that have synergies. Ally Bank provides stable funding for an auto-lending unit, while its insurance arm goes nicely with the finance business as an added in-dealership product. However, a government breakup may split the units into separate sales, according to Reuters reports and a KBW analysis.

Ally Bank could see strategic interest from lenders like CIT Group, who would find the banks roughly $1 billion in deposits to be a strong funding source for their commercial lending businesses, according to KBW. Additionally, Ally Bank could draw interest from a traditional bank looking to bolster deposits. "We calculate that the maximum value would roughly be a 2% deposit premium, which equates to a purchase price of around $1 billion," wrote KBW analysts in a February note.

The auto finance unit of Ally Bank may garner the attention of some of the largest U.S. banks like Wells Fargo, JPMorgan, Capital One (COF), Discover Financial Services (DFS), Huntington Bancshares (HBAN) and US Bank (USB), all with the balance sheets to make a sizeable acquisition, says KBW.

At the end of 2011, the North American auto finance unit had $54 billion in consumer loans and leases and an additional $32 billion in dealer loans, according to its financial statements. KBW analysts also note that the once GM-owned car lending arm still operates in 74% of the company's dealerships and in 63% of Chrysler dealerships.

With both General Motors (GM) and Chrysler reporting strong sales growth, Ally Bank's auto finance assets may warrant a premium-price in a takeover or an share sale.

Ally Bank's insurance unit has the most well documented sale plans, with reported interested parties that include Warren Buffet-run Berkshire Hathaway (BRK.A), however the business has been a hindrance to the Treasury's IPO plans.

In February, Ally and four of the nation's largest banks including JPMorgan, Bank of America (BAC), Wells Fargo and Citigroup (C) agreed to a $25 billion settlement on the litigation. That litigation iced a spring 2011 IPO.

Previous Ally owners like Cerberus, which had large Ally stakes prior to government bailouts still have significant share positions. Cerberus owns 8.9% of Ally Bank, while General Motors Trust has a 5.9% stake and General Motors has a 4% holding.

With strategic value to Ally Bank's deposit taking and auto lending businesses and some legal uncertainty removed on legal liabilities, the government may find that now is the time to exit its stake. "[The] U.S. Treasury is the majority shareholder and we do know the Treasury is looking to wind down its TARP program in the near future which could mean recouping investment in Ally through a company sale," writes KBW.

Watch for an IPO to emerge as a possibility if bidders don't come to the table or the Treasury decides that a share sale will fetch taxpayers the highest price.
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