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Berkshire Hathaway, the investment company run by Warren Buffett, sold Residential Capital bonds in the two days after it had requested a probe into the terms of the company’s bankruptcy, court filings show.
Berkshire is a major creditor of Residential Capital, the mortgage unit placed into bankruptcy by Ally Financial last month, according to a court filing on June 4.
On Monday, Berkshire filed a petition calling for an impartial examiner to investigate transactions before ResCap’s bankruptcy filing, whose net effect, Berkshire said, “was to transfer a substantial share of ResCap’s operating assets to [Ally]”.
In the next two days, Berkshire sold some of its bonds, according to a filing on Friday.
Ted Weschsler, a Berkshire investment manager who had filed a petition in support of the call for an independent examiner on Monday, wrote in a filing on Thursday: “I have been informed that on June 5 and 6 2012, Berkshire executed trades and sold its holdings of unsecured bonds issued by Residential Capital.”
Berkshire continues to hold more than 40 per cent of ResCap’s junior secured bonds, the latest filing stated.
Some of ResCap’s bonds have been trading at a steep discount to par value.
Berkshire did not immediately reply to requests for comment. Mr Weschsler could not be contacted. It was not clear from the latest filing whether Mr Weschsler was party to the decision to dispose of the bonds.
Ally Financial used to be known as GMAC, the financing arm of General Motors. It has been majority owned by the US Treasury since it was bailed out with $17.1bn of taxpayers’ money as part of the 2009 rescue of the US car sector.
Ally placed ResCap into bankruptcy in the hope of shedding its liabilities, such as the bonds held by Berkshire Hathaway and other investors, after the US Treasury signalled it would not block such a move.