Tuesday, June 12, 2012

Berkshire steps in to bid for ResCap assets

In another strange twist to the developing story of ResCap's bankruptcy, Berkshire has stepped in to bid on ResCap's assets. Berkshire decided to bid against Nationstar (owned by Fortress) for the mortgage origination and servicing businesses (worth $2.3bn) and against Ally (ResCap's parent) for the residual financial assets ($1.45bn bid).
WSJ: - Berkshire offered to be the "stalking horse" bidder for a $374 billion mortgage-servicing portfolio that ResCap already has a proposed agreement to sell to Nationstar Mortgage Holdings Inc., a monoline mortgage servicer majority owned by Fortress Investment Group. It also seeks to buy a portfolio of ResCap mortgages for which Ally has agreed to service as the stalking- horse bidder. [Just to clarify, Berkshire wouldn't be buying " $374 billion" worth of mortgages, only the servicing rights.]
Berkshire has claimed that the original sale to Ally was an "affiliated" off-market transaction and ResCap was not getting fair value. Improving the sale terms will certainly help Berkshire's large ResCap junior secured bond position. The recovery on the unsecured bonds (with a big portion held by Goldman) remains unclear.

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