A U.S. bankruptcy judge has ruled that defunct mortgage company Residential Capital LLC (ResCap) may proceed with repaying more than $1.9 billion in debt – including $1.1 billion to parent Ally Financial – which it borrowed before filing for Chapter 11 last year.
According to a Bloomberg News report, ResCap, the former mortgage division of Ally, plans to distribute more than $4 billion in cash to its creditors, who are owed at least $6.3 billion, as part of a deal struck with creditors and Ally last month.
The immediate repayment will save ResCap more than $3 million a month in interest. There will be no impact for lower-ranking creditors because the payments will be applied toward senior debt, according to the Bloomberg News report. The payments include $800 million for junior secured noteholders.
After filing for bankruptcy in May 2012, New York-based ResCap sold off its mortgage servicing platforms and loan portfolios in bankruptcy auctions, generating $4.5 billion in order to settle with creditors and resolve lawsuits brought by buyers of residential mortgage-backed securities.
Last month, Thomas Marano resigned as CEO of ResCap, but announced he will remain involved with the company as a member of the board of directors.
