WASHINGTON – The Treasury Department is converting $5.5 billion of its preferred stock in auto-finance company Ally Financial Inc. into common stock so the federal government will be in a better position to exit the investment.
The Treasury has invested more than $17 billion in Ally as part of the federal government's $700 billion financial-industry bailout known as the Troubled Asset Relief Program, or TARP. The company converted into a bank-holding company late in 2008, making it eligible to receive financial assistance from Treasury. The $5.5 billion represents nearly half of the Treasury’s holdings of preferred stock in Ally.
The conversion strengthens Ally’s capital structure by increasing the proportion of equity in the form of common stock, the Treasury said in a notice last week. The Treasury’s common equity stake in Ally – the company formerly known as GMAC Financial Services Inc. – will go to 74% from 56% of total common shares outstanding.
