WASHINGTON -(Dow Jones)- The U.S. Treasury selected Perella Weinberg Partners LP to advise it on management and the eventual sale of its stake in Ally Financial Inc., formerly known as GMAC Financial Services Inc.
In an agreement signed Jan. 18 and posted on the Treasury's web site, Treasury designated the privately-owned financial services firm as the government's financial agent, as it looks toward publicly listing its stake in the former financial arm of General Motors Co. (GM).
Perella will receive a monthly fee of $500,000--or $6 million over the one-year term of the contract--for its services.
Treasury through 2009 invested $17.2 billion in Ally Financial as part of the Troubled Asset Relief Program, or TARP, the government's $700 billion program to stabilize financial markets. An initial public offering would mark the first step in the unwinding of Ally's federal bailout.
The company is interviewing bankers this week for its IPO, according to people familiar with the matter. The banks being interviewed as potential underwriters include J.P. Morgan Chase & Co. (JPM), Citigroup Inc. (C), Goldman Sachs Group Inc. (GS) and Morgan Stanley (MS), the people said. The meetings, held in New York City Wednesday and Thursday, are with Ally officials, including Chief Executive Michael A. Carpenter, said one of the people.
The timing and size of the IPO are yet to be determined. Ally said in 2010 that it is mulling the stock offering for sometime this year.
As with almost any IPO, only a fraction of Ally's shares will be sold in its offering. The U.S. government, a majority owner of Ally, likely will have to sell its shareholdings over months or years to be fully repaid. The money the government ultimately realizes will depend on Ally's operating results and the market's evaluation of them.
At the end of last year, Treasury restructured its investment, leaving it with a 73.8% common equity stake, as well as trust preferred securities and preferred shares. The move was intended to make it easier for Ally to launch an IPO and repay its government debt.
Ally provides financing for dealerships and customers of General Motors and Chrysler Group LLC. Ally has spent the last two years trying to establish itself as a stand-alone company.
The lender's efforts include phasing out its old name, GMAC; expanding its core auto-lending activities beyond former parent GM, which is still its biggest auto partner; dismantling its hefty book of souring mortgages; and raising deposits and regaining access to the debt markets from which it was cut off during the credit crisis.
Ally became a bank-holding company at the end of 2008 to survive the credit crisis. The change made it eligible to receive federal aid. It was bailed out by the government as part of efforts to rescue GM and Chrysler.
For GM, the auto lender financed 83.7% of inventory in U.S. dealerships in the third quarter. During the same period, Ally funded 76.2% of new vehicles on lots of Chrysler dealers in the U.S.
Treasury is selling stakes it bought in companies during the financial crisis as it winds down TARP.
Most recently, Treasury said it would record a net $312.2 million from its sale of its 465.1 million warrants to purchase common shares of Citigroup.
The sale of the warrants, expected to close Monday, will enable the government to dispose of its remaining stake in Citigroup obtained through TARP.
Overall, taxpayers are expected to end up with a $12.3 billion profit on the government's $45 billion investment in the bank.
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