DETROIT -

Along with the renewal of an $11 billion credit facility, Ally Financial recently announced that it has commenced a consent solicitation from holders of record of its 8.000 percent notes due 2031.

The move is being made to terminate the replacement capital covenant entered into by Ally (as successor to GMAC) dated as of Nov. 30, 2006 in connection with the issuance by Ally of 1,555,000 preferred membership interests that were subsequently converted into Ally’s Fixed Rate/Floating Rate Perpetual Preferred Stock, Series A of which there are currently 27,870,560 shares outstanding.

The solicitation impact the valid holders as of 5 p.m. EDT this past Thursday.

Ally explained the proposed termination of the replacement capital covenant requires, among other conditions, the consent of the holders of notes representing at least 51percent in aggregate principal amount outstanding. The complete terms and conditions of the consent solicitation are as set forth in Ally's Consent Solicitation Statement dated March 11 and the related letter of consent to be distributed to holders of the notes for their consideration.

“Holders are urged to read the solicitation documents carefully,” the company said.

Under the terms of the replacement capital covenant, Ally indicated that it may only redeem the Series A Preferred Shares if a specified amount of the funds used are proceeds from the sale of equity or certain equity-like securities and if such sale took place within a specified time period prior to such redemption.

If the proposed termination becomes effective, Ally said it will not be subject to such restrictions with respect to a redemption of any or all of the Series A Preferred Shares.

The company pointed out the consent solicitation will expire at 5 p.m. EDT on March 22 unless extended or earlier terminated by Ally.

“If Ally accepts the valid consents of holders of at least 51 percent in aggregate principal amount outstanding of the notes and the conditions to the consent solicitation described in the consent solicitation statement are satisfied or waived, holders who validly deliver their consent by the expiration time in the manner described in the solicitation documents will be eligible to receive a consent fee of $10 in cash per $1,000 in principal amount of the notes as to which such consent was validly delivered,” the company said.

“Consents may be revoked at any time prior to the earlier of the date on which the requisite consents are obtained and the expiration time, which is referred to as the revocation deadline, but not thereafter,” the company continued.

“If the proposed termination of the replacement capital covenant is approved, the termination will be binding on all holders of the notes, including those that did not deliver their consent, and only holders validly delivering their consent on or prior to the expiration time will be eligible to receive the consent fee,” the company went on to say.

With respect to any consent accepted by Ally, the company explained that it will also pay the relevant soliciting broker a fee of $5 in cash per $1,000 in principal amount of the notes, provided that such fee will only be paid with respect to the first $250,000 aggregate principal amount of notes for which a consent is provided for any individual holder of the notes.

“The payment of such soliciting broker fee and the consent fee is subject to receipt by Ally of the requisite consents and satisfaction of the other conditions to the consent solicitation,” it noted.

Ally mentioned copies of the solicitation documents may be obtained by holders of the notes from the information and tabulation agent for the consent solicitation, global bondholder services corporation at (866) 807-2200.

Citigroup and Morgan Stanley are the solicitation agents for the consent solicitation. Questions regarding the consent solicitation may be directed to Citigroup at (800) 558-3745 or (212) 723-6106 or Morgan Stanley at (800) 624-1808 or (212) 761-1057.

“None of Ally, the information and tabulation agent, the solicitation agents or any of their respective affiliates makes any recommendation as to whether holders of the notes should deliver their consent to the proposed termination of the replacement capital covenants pursuant to the consent solicitation, and no one has been authorized by any of them to make such recommendation,” the company said. “Each holder of the notes must make its own decision as to whether to give its consent.”

Ally’s renewal of $11 billion in credit facilities

In other company news, Ally highlighted that it has completed the renewal of $11 billion in credit facilities to fund consumer and commercial automotive assets at both the parent company and at its banking subsidiary, Ally Bank, with a syndicate of 16 lenders.

Executives noted the decrease in the total size of the facilities of $1.5 billion compared to the prior year is a result of Ally's continued strong retail deposit growth.

“A diversified funding strategy remains a key priority to effectively support the needs of Ally's business,” Ally corporate treasurer Bradley Brown said. “These facilities were renewed with improved structural terms that accommodate the continued evolution and growth of our auto finance business.”

Brown added the $11 billion funding capacity is comprised of two facilities both maturing in March 2018; an $8 billion facility, which is available to the parent company, and a $3 billion facility available to Ally Bank.