The U.S. Department of Treasury is converting $5.5 billion of Ally Financial’s preferred stock into common shares, Financial Times reports. The treasury’s stake in the former financing arm of General Motors will increase to 74% from 56% once the conversion goes through. The conversion will leave Cerberus Capital Management and affiliates holding around 8.9% stake, third-party investors with a 7.4% share, General Motors Trust with 5.9% and GM with a 4% stake, adds Bloomberg. Detroit-based Ally is preparing for an initial public offering in 2011.

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