ResCap Judge Approves Probe Into Pre-Bankruptcy Deals ...

The judge overseeing Residential
Capital LLC?s bankruptcy ordered a probe of the mortgage
company?s proposal to settle legal claims against its parent
Ally Financial Inc. (ALLY) (ALLY) that may be worth billions of dollars.

U.S. Bankruptcy Judge Martin Glenn today granted a request
from Berkshire Hathaway Inc. (BRK/A) (A), the holding company run by
billionaire Warren Buffett, for an independent investigation of
ResCap?s proposal to accept $750 million from Ally to settle
potential legal liability tied to mortgage-related securities.

?Under the facts and circumstances of this case, the court
concludes appointment of an examiner is required,? Glenn said
at a court hearing in Manhattan.

ResCap, based in New York, filed for bankruptcy May 14 with
an agreement making an affiliate of Fortress Investment Group
LLC (FIG) (FIG) the lead bidder at an auction for its mortgage lending and
servicing unit. Ally, a Detroit-based bank that specializes in
car loans, is 74 percent-owned by the U.S. Treasury after
receiving a bailout.

Glenn put off deciding some details of the investigation,
including how much money the examiner will have to spend and
when a public report on the probe will be due. Those issues will
be decided after the U.S. Trustee names an examiner, Glenn said.

Ally has agreed to pay $750 million to ResCap, purchase as
much as $1.6 billion of securities if others don?t, and provide
$150 million to help finance ResCap?s operations during
bankruptcy, according to a company statement.

Berkshire owns about $900 million of ResCap?s junior
secured bonds. Berkshire argued that various deals ResCap made
with Ally and others while preparing to file bankruptcy should
be investigated by an independent, court-approved examiner.

Glenn has already approved a similar investigation being
conducted by the official committee of unsecured creditors,
which is typical in large bankruptcy cases.

ResCap?s 6.5 percent, unsecured bonds that mature next year
rose 4.6 percent to 23 cents on the dollar, according to Trace,
the bond-price reporting system of the Financial Industry
Regulatory Authority.

Of ResCap?s 33 biggest unsecured claims, 32 were related to
active or potential mortgage-securities litigation, according to
court papers. ResCap didn?t give a value for the claims and said
it disputes all of them.

Berkshire is also seeking to buy ResCap?s mortgage
servicing unit for about $2.4 billion and a portfolio of loans
for about $1.45 billion, according to court documents.

Before ResCap filed for bankruptcy it agreed to name
Fortress? Nationstar Mortgage Holdings Inc. (NSM) (NSM) as the lead bidder
for the mortgage unit and Ally as the lead bidder for the loan
portfolio.

The case is In re Residential Capital LLC, 12-12020, U.S.
Bankruptcy Court, Southern District of New York (Manhattan).

To contact the reporter on this story:
Steven Church in Wilmington, Delaware, at
schurch3@bloomberg.net

To contact the editor responsible for this story:
John Pickering at
jpickering@bloomberg.net

mike james red tails red tails heidi klum heidi klum red tails trailer joe pa dead