Judge James M. Peck of the U.S. Bankruptcy Court for the Southern District of New York in Manhattan will consider the appointment of an examiner on June 18.
Berkshire Hathaway, which holds in excess of $500 million in unsecured bonds and in excess of $900 million in junior secured bonds issued by ResCap, sought the appointment of an examiner to probe and report on actions by ResCap and its affiliates, including prepetition transactions with its parent, Ally Financial Inc., potential claims against its directors and officers and any claims proposed to be released under its prepackaged reorganization plan.
According to the June 4 motion, Berkshire Hathaway has held in excess of 50% of ResCap's unsecured bonds and more than 40% of its junior secured bonds for the past several years, and has a significant stake in the outcome of the case.
"Berkshire agrees with the official committee of unsecured creditors that an investigation is necessary into the debtors' prepetition transactions with Ally and its affiliates, and the settlements underlying the reorganization plan that the debtors now seek to confirm on a highly abbreviated schedule," the motion said.
Through its reorganization plan, the debtor is looking to release Ally from any valid claims, including claims for fraudulent transfer, equitable subordination and alter ego, airing from certain transactions, Berkshire Hathaway said in court filings.
"An examiner should determine whether this proposed release is fair to the debtors and all their stakeholders," the motion said.
Debtor counsel Larren M. Nashelsky, Gary S. Lee and Lorenzo Marinuzzi of Morrison & Foerster LLP couldn't be reached for comment.
ResCap spokeswoman Susan Fitzpatrick declined comment.
ResCap filed for Chapter 11 on May 14 with a prepackaged reorganization that would allow it to complete its restructuring by the end of the year.
The company is funding its bankruptcy case through the use of two debtor-in-possession loans.
Barclays Bank plc is providing a $1.45 billion DIP, comprising a $1.05 billion A-1 term loan, a $200 million A-2 term loan and a $200 million revolver.
Ally is providing a $150 million new-money DIP priced at LIBOR plus 400 basis points.
Under plan support agreements with Ally and other secured and unsecured creditors, ResCap will file its prepackaged reorganization plan and disclosure statement within 30 days of the petition date.
The prepackaged plan is supported by holders of 37% of ResCap's junior secured notes, who agreed to a settlement that would reduce the estate's interest obligations by $350 million.
Additionally, institutional investors holding more than 25% of at least one class in each of 293 securitizations have agreed to support the reorganization. The 293 securitizations originally raised $164 billion but now have an outstanding balance of $221 billion. The settlement with the institutional investors would cap their claims at $8.7 billion.
During the bankruptcy, ResCap will continue to offer loan modifications, originate new loans and service its existing loans while it seeks to sell substantially all of its assets. ResCap will wind down its 13 international nondebtor subsidiaries. ResCap has already sold its Mexican subsidiary, effective May 11.
ResCap's primary operations include servicing mortgage loans for investors. As of March 31, the debtor was servicing 2.4 million loans with an unpaid principal balance of $374 billion, making it the fifth-largest servicer of residential mortgage loans in the U.S., according to an affidavit by James Whitlinger, the CFO for Ally and ResCap. About 68% of the loans serviced by ResCap are owned, insured or guaranteed by government entities Fannie Mae, Freddie Mac and Ginnie Mae.
Ally, formerly known as General Motors Acceptance Corp., is a leading automotive financial services company. Since 2009, it has provided about $100 billion in financing for nine million vehicles in the U.S. GMAC changed its name to Ally in 2010.
The government extended a $16.3 billion bailout to then-GMAC in 2008. About $11 billion is still outstanding.
Ally operates as a bank holding company and had about $186 billion in assets as of March 31. The company said ResCap's bankruptcy won't interrupt its business operations. Ally will explore alternatives for its international operations.
Counsel to Berkshire Hathaway is Thomas B. Walper, Seth Goldman and Bradley R. Schneider at Munger, Tolles & Olson LLP.
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