August 14, 2014 at 11:02 am

Treasury to begin sale of final Ally shares

The U.S. Treasury Department said Thursday it will begin its effort to complete its exit of Detroit-based auto lender Ally Financial Inc. by selling additional shares of its 75.1 million remaining shares.

Treasury — which gave the auto lender $17.2 billion in total bailouts in 2008 and 2009 — holds about a 16 percent stake in Ally. Treasury has a written stock sale plan, based in part on market conditions, but doesn’t make that public. The government will start selling shares Thursday.

“Treasury’s sale of additional Ally common stock is part of our continuing effort to wind down the Troubled Asset Relief Program,” said Treasury Chief Investment Officer Charmian Uy. “We will prudently exit the remaining Ally investment, balancing speed with maximizing returns for taxpayers.”

Ally has said the government could exit completely by year’s end. It would mark an end to the government’s $85 billion auto bailout and a historic period of intervention to rescue the U.S. auto industry. The sale marks Treasury's first sale of Ally shares since Ally's IPO in April. Shares in Ally are trading up 1.5 percent, or $0.36, to $23.81 on the news.

Shares in Ally are trading up 1.5 percent, or $0.36, to $23.81 on the news.As part of Ally’s initial public offering in April, Treasury sold 95 million shares of Ally common stock at $25 per share for $2.375 billion dollars in proceeds to taxpayers. The underwriters of the IPO later exercised their option to purchase 7.25 million additional shares at the IPO price, recovering an additional $181 million for taxpayers.

Taxpayers have now recovered approximately $17.8 billion on the Ally investment, roughly $650 million more than the original $17.2 billion investment.

To date, taxpayers have recovered a total of $439.8 billion on Troubled Asset Relief Program investments, including the sale of Treasury’s AIG shares, compared to $424.8 billion disbursed.

Treasury said there will be opportunities for smaller broker dealers, including women and minority-owned broker dealers, to participate in the sale of Treasury’s remaining Ally common shares pursuant to the plan.

In a July 18 letter to the Government Accountability Office, Timothy J. Bowler, the assistant Treasury secretary who oversees the government’s remaining bailouts under the Troubled Asset Relief Program, said the government will exit “in a manner that balances the speed of recovery with maximizing returns for taxpayers.”

The GAO report said that “Treasury officials told us that Treasury does not have a specific date by which it intends to fully divest from the company.”

The government’s remaining stake is currently worth about $1.8 billion.

Ally, previously known as GMAC and General Motors Corp.’s in-house lending arm, sold off most of its international lending operations to GM.

Profits from Ally will not be enough to offset the losses on bailouts of General Motors and Chrysler: $11.2 billion on GM and $1.3 billion on Chrysler. But including profits on the bank bailouts, taxpayers will see a net gain on the $700 billion Troubled Asset Relief Program.

In an interview in April, Ally CEO Michael Carpenter said he thought Treasury would pursue a secondary offering to complete its exit in coming months.

“My own view is they will definitely be out before the November election and we are close to having Treasury and U.S. government ownership in the rearview mirror,” Carpenter said.

Carpenter said the exit takes away “a concern that people have — like other (automakers) and so forth — a concern that they may have in doing business with us. That’s one benefit,” he said.

He noted that Ally faces a “series of handcuffs that regulators put upon us — not because they don’t like us or our financial condition’s not good or whatever — but because we’re owned by the government.”

Ally is the only bailout recipient that still faces government pay restrictions, which will lift when the government completely exits.