Uncle Sam will likely get some cover Monday in bankrupt mortgagor ResCap’s battle with Warren Buffett.
Bankruptcy Judge Martin Glenn is expected to uphold the decision by the government-owned ResCap to reject an offer from Buffett’s Berkshire Hathaway to be the favored bidder to acquire its mortgage servicing portfolio, sources said.
“Warren’s request is a bit too little, too late,” a source said.
ResCap met with Buffett’s lawyers yesterday to discuss hiring a special independent examiner to probe settlement agreements of the bankrupt company’s parent, Ally Financial.
Ally entered into a deal with Fortress Investment Group prior to ResCap’s May 14 Chapter 11 filing. That deal allowed FIG’s $2.4 billion offer for ResCap’s mortgage unit to be the so-called stalking horse bid.
Buffett has offered $2.4 billion to buy ResCap’s servicing portfolio, matching the agreement with Wes Edens’ FIG to buy the same assets.
Fortress, though, received approval from Fannie Mae and Freddie Mac to be the favored bidder for the assets, unlike Buffett, justifying the larger break-up fee.
ResCap has agreed to pay Fortress a $72 million break-up fee if FIG is outbid, and Buffett is willing to make the same offer and take a much lower $24 million break-up fee.
Fortress has won the backing of ResCap’s unsecured creditors committee, and with its support, it is expected to get the judge’s backing, sources said.
ResCap said in a prepared statement, “Fortress will likely remain the highest and best offer for the debtors.”
The judge on Monday will set up bidding guidelines, and rivals will get to make competing offers by a likely October deadline.
“I suspect in the auction Fortress will have to pay more,” a source close to the situation said.
The judge can choose to reject ResCap’s proposal and make Buffett the favored bidder.
jkosman@nypost.com
Fortress Investment Group, Ally Financial.Ally, Berkshire Hathaway, ResCap, Martin Glenn
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