Ally Financial Inc. is actively considering putting its ailing Residential Capital LLC mortgage-lending unit into bankruptcy, said people familiar with the situation.
Ally is being advised by Kirkland & Ellis and Evercore on a possible restructuring of Residential Capital, the troubled home lender that has lost $555 million over the past two quarters. A final decision on any restructuring at ResCap hasn't been made, the people said.
Ally warned during a conference call to discuss its third-quarter earnings this month that, just because it has supported ResCap in the past, doesn't mean it will continue to do so in the future.
ResCap has long been a drag on Ally, which received $17 billion of U.S. aid following the financial crisis and has been trying to set itself up for an initial public offering that would allow the government to reduce its 74% stake in Ally. ResCap's fate has long been a flash point inside the company.
ResCap is being advised by Morrison Foerster and Centerview, a person familiar with the matter said. The involvement of Centerview and Evercore was first reported by Bloomberg News.