Reorg Research Coverage of Rescap PSA

Because of Reorg Research's technology, our subscribers will be among the first to receive and review bankruptcy dockets in a litany of cases. Likewise, our reporters, analysts and I have first mover advantage in analyzing key documents in cases. We put out stories on developments in bankruptcy cases, whether for new docket filings or for court proceedings, before other services on the market. And I take pride in the depth of our analysis, about which we've heard unanimously positive feedback.

Here is our piece on Rescap's PSA that was filed shortly after the PSA hit the docket. Enjoy!

Ally Agrees to Pay $2.1B in ResCap Settlement

Residential Capital’s former parent Ally Financial agreed to pay a maximum of $2.1 billion in order to free itself from potential litigation after ResCap’s bankruptcy process has been completed.

ResCap filed the previously announced plan service agreement, the “global agreement”, the former mortgage servicer reached with Ally and multiple constituents after months of negotiations.

Ally will increase its contribution to the ResCap’s estate by $1.35 billion over the amount agreed to in the PSA to a total of $2.1 billion comprised of:

• $1.95 billion in cash
• $150 million from a settlement between Ally and its insurers (paid no later than Sept. 30, 2014), for any Director and Officers or Errors and Omission claims

The Ally Contribution, per the PSA term sheet, is capped at $2.1 billion. In exchange Ally will receive, among other things, ResCap releases and third party releases in favor of Ally. The releases do not release any claims against Ally held by the FDIC.

The contemplated plan provides for partial consolidation (for distribution purposes only) of ResCap’s estate into three groups (1) The ResCap debtors (which includes the holding company, GMAC Residential Holding Company, LLC, and GMAC-RFC Holding Company, LLC), (2) the GMAC Mortgage debtors (includes GMAC Mortgage, LLC and its direct and indirect subsidiaries), and (3) the RFC debtors (which include Residential Funding Company, LLC and its direct and indirect subsidiaries.) Plan distributions will be funded by a combination of $4.5 billion in proceeds from previous asset sales, assets remaining in the estate, the Ally contribution with certain security litigants and borrowers receiving distributions through three trusts.

Key points from the PSA also include that the creditors’ committee and supporting parties will support a partial paydown of no less than $800 million of the 9.625% junior secured notes due 2015 secured claim, provided that Ally is paid prior to any such paydown of the JSN secured claim in cash in full satisfaction of the outstanding Ally loan. The PSA term notes that the “Plan will provide payment in full on the Effective Date of the allowed prepetition claims of the

Junior Secured Noteholders” and that “The Plan will provide that the Junior Secured Noteholders are undersecured and not otherwise entitled to payment of any post-petition interest."

Also party to the settlement, Paulson & Co. may not seek to terminate this agreement if Wilmington Trust ceases to be a party to it.

The breakdown of the distributions to unsecured creditors is as follows:

• Holders of allowed private securities claims will get their share of $225.7 million
• Holders of allowed borrower claims share $57.6 million
• Holders of allowed NJ carpenters claims share $100 million
• Allowed estate unsecured claims at ResCap debtors get their pro rata share of available unsecured assets totaling $752 million
• Allowed estate unsecured claims at the GMACM debtors share in $600 million
• The allowed estate unsecured claims at the RFC debtors receive unsecured assets valued at $789.6 million

A Liquidating Trust will be established: Assets of this trust will include the Ally Contribution and Rescap’s remaining assets. From the term sheet: “Holders of allowed unsecured claims and the Private Securities Claims Trust will receive units of beneficial interests in the Liquidation Trust (“Trust Units”),allocated in accordance with the treatment under the Plan and the Allocation Percentages set forth on Annex I.

Of particular note, the senior unsecured notes claim recovery will be $351.4 million versus an allowed claim of $1.003 billion.

The plan shall provide for the allowance, priority, and allocation of the monoline claims, as follows:

• MBIA claims fully and finally allowed as non-subordinated unsecured claims of $719 million against the ResCap Debtors, $1.45 billion against the GMACM debtors, and $1.45 billion against the RFC debtors.
• FGIC claims shall be fully and finally allowed as non-subordinated, general unsecured claims in the aggregate amount of $596.5 million. The settlement and release of FGIC’s ResCap-related insurance indemnity obligations pursuant to the FGIC Settlement Agreement shall be approved by the bankruptcy court, by separate 9019 motion, and by the FGIC Rehabilitation Court

Conditions of the plan include court approval of the disclosure statement and the RMBS Settlement, a preliminary hearing for which takes place today. In addition, a termination even includes “the Examiner’s Report is disclosed to any party on or before the Bankruptcy."

Court enters the PSA Order;” From the PSA Term Sheet “The Examiner Report shall be sealed through and including the earlier of (a) the date the Bankruptcy Court approves the Plan Support Agreement, and (b) July 3, 2013, provided that if the Plan Support Agreement is terminated, the Examiner Report may be filed publicly the next Business Day after the effective date of such termination.”

PSA milestones include:

    July 3 - deadline to file plan and disclosure statement, receive court approval of the PSA

    Aug. 19 - court approval of a settlement agreement with FGIC and RMBS trustees

    Aug. 30 - approval of adequacy of disclosure statement

    Earlier of 30 days post-confirmation order and Dec. 15- plan effective date

Prior to the closing of ResCap’s court-approved asset sales, the company and its non-debtor affiliates operated the fifth largest mortgage servicing business and the tenth largest mortgage origination business in the U.S., according to the company description in the PSA.

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