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Investors pay premium for Ally Financial's shares in private deals- sources

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January 2
11:20 PM 2014

Sources told Reuters that demand for the shares of Ally Financial has grown as recent private deals showed investors paying increasingly high prices for them. The report also said the growing demand could be a signal that the US government might be able to divest its remaining stake in the auto lender in 2014.

For the past two years, the auto lender has been hoping to go public, but investors continue to fear problems that compelled it to ask for a government rescue worth $17 billion during the financial crisis. These challenges included the bad home loans made at its Residential Capital subprime mortgage unit.

However, investors have become more confident that Ally's troubles have started to clear up as Residential Capital prepares to get out from bankruptcy. Hedge funds have bought shares in the firm in two private deals, an indication that the government which holds an estimated 64% of Ally may also get buyers in public markets, the report said.

Bankers and company executives have said that even if there is no demand in public markets, the government may be able to divest its shares to private investors. In a November 5 conference call attended by analysts, Ally Chief Executive Michael Carpenter had said, "There might well be enough demand in the private market to take Treasury out in whole."

In a blog post posted December 30 on the website of the US Treasury, a department spokesman said the agency is also considering exiting from its remaining investment in the company through an initial public offering, asset sales or through a private placement, the report said.

Although Ally Financial still faces difficulties, the report said investors in the private market seemed to be optimistic about the prospects of the company. In November, Ally was able sell $1.3 billion worth of unlisted shares to private investors at an average price of about $6,000 per share. A few weeks later, GM was able to divest its 8.5% stake in the auto lender for a much higher price of $6,800 per share, the report said.

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