Ally, the former finance arm for GM, files for IPO

NEW YORK (AP) -- The former finance arm of General Motors said last Thursday it is preparing an initial public offering as it seeks to repay billions in government aid received during the financial crisis. Ally Financial Inc. said in a filing with the Securities and Exchange Commission that the IPO could raise up to $100 million, but the actual offering will likely be larger. The preliminary estimate of proceeds often changes closer to the IPO date as the offering is pitched to investors. GM itself is an example of the possible change in amount: When it announced plans to go public to pay money back to the government after being bailed out, it also said it would sell up to $100 million worth of common stock in its initial filing. The IPO in November raised $23.1 billion. "We're talking about a number that could vary dramatically," said Scott Sweet, a longtime analyst of IPOs and founder of IPO Boutique. "GM started at a number that wasn't even remotely close to where it ended. That's likely the same situation here." Ally will not receive any proceeds from the IPO. An Ally spokesman declined to comment on when the company would go public or how many shares it expected to sell. Neither Ally nor Treasury officials would say how many shares the government would sell in the IPO. The agency, which currently owns 74 percent of Ally's stock, said in a statement that it supported Ally's move to launch the IPO. Ally, formerly known as GMAC Inc., makes loans to GM and Chrysler customers and finances dealer inventories. The Detroit-based company received government aid in late 2008 as part of the Bush administration's assistance to the U.S. auto industry. The Obama administration invested additional sums in May and December 2009. The company, which also had a mortgage lending division, Residential Capital LLC, had suffered from a strained credit market, the housing downturn and sliding demand for new autos during the recession. At the time, analysts had speculated that the company might have to file for bankruptcy protection or shut down without financial help. In total, Ally received $17.2 billion in government support. It has already returned $4.9 billion through dividend payments and trust preferred securities sold earlier this month. In addition to its holdings of common stock, Treasury also owns $5.9 billion in preferred stock, which are convertible into common stock. For Treasury to break even on the $17.2 billion in support it provided Ally, it will have to sell the preferred stock for the $5.9 billion it is valued at and realize approximately $6.4 billion from the sale of the common stock. The company is going public as the auto market revives. Ally, which says it financed 10 percent of new cars purchased last year, posted a profit of $1.1 billion last year, compared to a loss of $10.3 billion in 2009. Revenue rose to $7.9 billion from $6.5 billion. Citi, Goldman Sachs, J.P. Morgan and Morgan Stanley are managing the IPO. The four banks were also involved with GM's IPO. Published: Mon, Apr 4, 2011