Treasury Dept Helps Ally Financial with IPO

Treasury Dept Helps Ally Financial with IPO

In a move which will ultimately ease the way for Ally Financial to make an initial public offering (IPO), the Treasury Department announced that it plans to convert part of its ownership stake in the company from preferred to common shares. The common shares will not pay the government any dividends like the preferred shares have.

The Government had bailed out Ally (formerly GMAC), to the tune of $17.2 billion, as part of the bank bail-outs and has so far received about $2 billion in dividends back from the lender. Once Ally is able to make its IPO, the Treasury feels that it will be able to repay the government loans at a faster pace. The converted shares should be easier to sell on the market and should smooth the way for the IPO.

The new balance sheet of the company should make Ally more attractive to investors once the conversions are made. The government, and ultimately taxpayers will still own almost ¾ of the company’s common shares after the IPO, and should be in a good position to get paid back faster.