WASHINGTON - General Motors Co. is selling all of its fixed-rate perpetual preferred stock in Ally Financial Inc. for $1 billion, it said Tuesday.
The sale should close by the end of the week.
GM sold a 51 percent stake in GMAC, which was renamed Ally Financial, to Cerberus Capital management LP for $7.4 billion in 2006, reported The Detroit News.
As part of the sale, GM received preferred stock valued at $1.4 billion in 2006.
"Today, we are taking another step forward in our strategy to strengthen and simplify the company's balance sheet," said Chris Liddell, GM's outgoing vice chairman and chief financial officer.
After GM exited bankruptcy, it valued its Ally Financial stake at $665 million.
The transaction will result in a gain of $300 million to be recorded in the first quarter of 2011.Following the sale, GM's investment in Ally Financial will shrink to a 9.9 percent interest in Ally commonstock.
Ally Financial is 74 percent owned by the U.S. Treasury, which gave the Detroit-based auto and mortgage lender a $17.2 billion bailout.
The company hopes to launch an IPO later this year and may file its prospectus by the end of June.
Treasury Department representatives declined to comment Tuesday on GM's announcement.
Ally makes loans to GM customers and finances dealer inventories.
The government first bailed out the company, then known as GMAC Inc., in late 2008 as part of the Bush administration's aid to the auto industry. The Obama administration provided additional money in May and December 2009.
The Treasury Department has said that Ally has made good progress in restructuring its operations. But a congressional oversight panel in January criticized what it called Treasury's "hands-off" approach toward Ally.
The Treasury Department hopes to get back more taxpayer money through a public stock offering of Ally.
