Ally Financial (GMA) in Detroit has agreed to sell $1 billion of stock to help fund the buyback of about $5.9 billion of preferred stock from the Treasury Department.
The $151 billion-asset company has agreed to sell 166,667 shares of common stock for $1 billion through a private placement, it said in a regulatory filing Tuesday. Ally's common stock closed trading Monday at $24.90 a share.
The purchasers include new and existing investors in the company, an Ally spokeswoman said. Ally did not identify them.
Ally will use the new funds to reduce the Treasury's ownership stake in the company. It has agreed to pay the Treasury Department $5.2 million for about 119 million preferred shares, and will pay $725 million to terminate the Treasury's right to convert certain additional shares.
The government provided about $17 billion of aid to Ally, formerly GMAC, during the financial crisis, and the Treasury held roughly 74% of the company's common stock as of the end of February, according to Ally's most recent annual report. Other investors include General Motors and Cerberus Capital Management.
Ally's stock sale, which must be completed by Nov. 30, will be submitted for approval by the Federal Reserve Board, the company said.
"These transactions are key steps in Ally's journey toward repaying the remaining investment by the U.S. taxpayer," Chief Executive Michael Carpenter said in a press release. "The actions announced today will clear the way for Ally to pursue the next steps to ultimately exit the [Troubled Asset Relief Program] and enable its operations to further thrive."
In addition, Ally, the Treasury and an affiliate of Cerberus Capital Management have agreed to a plan that would reduce the number of seats on Ally's board that the Treasury controls as the government reduces its stake in the bank, Ally said in the regulatory filing Tuesday. The Treasury will appoint six of the 11 seats on Ally's board if its ownership stake is 50% or higher; the number of seats it controls would decline as its stake falls, down to one seat if its ownership falls to less than 10%.