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ResCap creditors, Ally nearing deal on billions in claims

By Tom Hals

(Reuters) - Creditors of bankrupt Residential Capital LLC are nearing a deal to settle billions of dollars of claims against the mortgage lender's parent, Ally Financial Inc , a development that prompted a delay in a much-anticipated report on ResCap's failure.

A mediator overseeing talks between Ally and ResCap creditors asked that an independent examiner postpone his report on claims that Ally should be held responsible for up to $25 billion of ResCap liabilities, according to a court filing.

That report was expected to be published on Friday at noon. The examiner's attorney said in a filing with Manhattan bankruptcy court on Friday that the report will now be published at 3 p.m. on Monday.

"The mediator and the parties to the mediation believe that a short postponement in the filing of the report would assist the mediation process," Howard Seife of Chadbourne & Parke, who represents the examiner, said in the court filing.

Creditors of ResCap are pursuing billions of dollars of cash that Ally had raised by selling its international business and planned to use to repay the remaining $11 billion of a U.S. government bailout.

ResCap creditors have said Ally, which is about three-quarters owned by the U.S. government, could be on the hook for up to $25 billion owed to them by ResCap.

The examiner, former Manhattan bankruptcy judge Arthur Gonzalez, was appointed to investigate allegations of improper activity before the ResCap bankruptcy, including claims that Ally Bank was improperly transferred from ResCap.

Gonzalez also examined the pre-bankruptcy deals between Ally, ResCap, Ally investor Cerberus Capital Management LP and others, as well as the negotiations that led to Ally's initial proposed settlement of $750 million. ResCap creditors rejected that offer as too low.

Reaching a deal is critical for Ally, which is struggling to put behind it the mortgage lending business so it can focus on its core U.S. auto lending business. It is also looking to repay the U.S. government, which in 2008 bailed out the company, formerly known as General Motors Acceptance Corp.

Ally and Kenneth Eckstein, an attorney for the unsecured creditors of ResCap, did not immediately respond on Friday to a request for comment.

THE $80 MILLION REPORT

Examiners are only appointed in a small number of bankruptcy cases and their reports do not carry the weight of a court finding.

However, the reports can upend a bankruptcy that is near resolution as happened in the Chapter 11 of Tribune Co. The newspaper publisher was bottled up in bankruptcy for two years after an examiner found indications of fraudulent behavior in a leveraged buyout that creditors blamed for the company's failure.

Gonzalez's investigation has burned through more than $80 million of ResCap's money as his team interviewed more than 90 witnesses and reviewed 9 million pages of documents. Some parties to the bankruptcy told Reuters there was a growing sense his report might be so thorough that every party will be both helped and hurt by his findings, lending support to a mediated settlement.

ResCap was once one of the largest U.S. subprime mortgage lenders in the United States. It filed for bankruptcy in May 2012 as litigation over soured mortgage bonds mounted.

(Reporting by Tom Hals in Wilmington, Delaware; Editing by Steve Orlofsky)

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