Warren Buffett's floated firm Berkshire Hathaway, the US underwriter has made an offer to acquire Residential Capital’s RESC.UL mortgage unit.
Berkshire Hathaway is vying with Nationstar Mortgage Holdings, owned by Fortress Investment, to emerge as the primary bidder for the bankrupt company's mortgage servicing unit, as reported by Reuters.
With plans to sell its unit to Nationstar for nearly $2.4bn, ResCap, the mortgage unit of Ally Financial, filed for bankruptcy in May.Ally, the former in-house financing arm for General Motors is not in bankruptcy.
Berkshire has also decided to offer initial bid for a portfolio of loans that ResCap had planned to sell to Ally for nearly $1.4bn.
Auction will take place after receiving approval from the bankruptcy court and is expected to be held in September this year.
If ResCap fails to win the auction, it will have to cough up $72m break-up fee and up to $10m in expense reimbursement to Fortress, as per the proposed agreement between the parties, however, Berkshire offered a reduced break-up fee to $24m and to eliminate the expense reimbursement.
The bankruptcy and sale will provide Ally a way to mitigate its mortgage liabilities as part of an effort to repay the US taxpayers for a series of bailouts during the financial crisis.