Buffett wins OK for ResCap probe
- Last Updated: 1:01 AM, June 19, 2012
- Posted: 12:46 AM, June 19, 2012
Score one for Warren Buffett in his battle over government-owned Ally Bank.
Speaking in front of a packed courtroom, Judge Martin Glenn yesterday backed Buffett’s request to name an independent examiner to probe deals between the bankrupt mortgage firm Residential Capital and its parent company, Ally.
“Point me to a case where this early in a bankruptcy the judge has struck down a request for an independent examiner,” Glenn told lawyers for ResCap creditors.
Along with ResCap’s Chapter 11 filing in May, the company agreed to sell its mortgage-servicing business to Fortress Investment Group for $2.3 billion, and a portfolio of mortgage loans to parent Ally for $1.4 billion.
Berkshire — a major ResCap creditor — contends that the transactions with Ally are “potentially improper” and that an examiner should investigate whether they were conducted at arm’s length.
ResCap has argued that appointing another investigator is unnecessary, as a committee of ResCap’s unsecured creditors has already hired an examiner to probe the very same deals.
Yesterday, Christopher Shore, an attorney for ResCap’s creditors, reiterated that there was no need to hire a second investigator. He also said giving in to Berkshire would give it “overly broad, unfettered access” to documents and potentially interfere with ResCap’s proposed $8.7 billion settlement with buyers of soured mortgage-backed securities.
“Our concern is that an independent examiner not interfere with the settlement,” Shore said.
Ally, which wants to jettison ResCap through bankruptcy, might not be able to if it has to rework its settlement.
Meanwhile, Buffett is also trying become the favored bidder for ResCap’s mortgage-serving portfolio, over ResCap’s choice of Fortress.
Berkshire has asked the judge to make it the “stalking horse” bidder.
The judge gave a deadline of last night for Fortress and Berkshire to make their best offers.