Ally Financial Repays $5.9 Billion to U.S. Treasury

Ally Financial Inc. said Wednesday it repaid $5.9 billion of its $17.2 billion bailout as the auto lender works to get out from government ownership.

The move puts the government a step closer to exiting its stake in the Detroit-based company, which struggled under the weight of subprime mortgage losses during the financial crisis that almost led to the firm's collapse.

"Taxpayers are now in a stronger position to maximize the value of their remaining investment in Ally," Timothy Bowler, deputy assistant secretary of the Treasury, wrote in a Treasury blog post Wednesday. He added that Treasury "will work with Ally on a public offering or private sale of its common shares or sales of assets to complete its exit."

Ally Chief Executive Michael Carpenter has previously said an IPO or private transaction could be options as the U.S. government looks to exit its remaining stake in the company.

Ally on Friday said it expected to repurchase $5.9 billion of preferred shares owned by the Treasury after the Federal Reserve said it didn't object to revised capital plan from the company. Including Wednesday's announcement, Ally has repaid $12.3 billion of its bailout, Mr. Bowler wrote.

"Looking ahead, we will be focused on taking steps to further improve profitability, maintain strong core auto finance and direct banking franchises and fully exit the Troubled Asset Relief Program," Mr. Carpenter said in a statement on Wednesday.

The Fed in March rejected a plan Ally submitted under the regulator's stress tests of big banks, deeming its capital levels would be too low to survive an economic downturn.

The move was a blow to the company, which has worked to dig its way out of legal issues largely tied to its subprime-mortgage subsidiary, Residential Capital LLC, which filed for Chapter 11 bankruptcy last year. The final goal is repayment of the bailout.

To boost its capital levels and move ahead on those plans, Ally said in August it would sell shares through a private placement of common stock to about a dozen investors and seek permission to repurchase the preferred shares from Treasury.

Ally said Wednesday that it completed the private sale of 216,667 shares for about $1.3 billion.

The moves reduced Treasury's ownership of Ally to about 64% from 74%.

Mr. Bowler is in line to head manage the government's crisis relief programs, succeeding Timothy Massad as Assistant Secretary for Financial Stability, a Treasury spokesman said Wednesday. The position includes unwinding the government's investments in banks under the Troubled Asset Relief Program.

Mr. Massad is President Barack Obama's pick to head the Commodity Futures Trading Commission, though he must be approved by the Senate for the position.

-Ryan Tracy contributed to this article.

Write to Andrew R. Johnson at [e-mail]

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