Ally Financial has filed to offer shares to the public in a first step for the U.S. government to sell down its majority stake in the former General Motors credit arm.

The auto and mortgage lender filed with U.S. regulators on Thursday to raise up to $100 million in an IPO, although the offering could ultimately raise about $5 billion, including common stock and convertible securities, a source familiar with the situation told Reuters.

Bad mortgage loans forced the U.S. Treasury to pour $17.2 billion into Ally during the financial crisis. So far, it has recovered $4.9 billion of taxpayer money through repayments and dividends and continues to hold a 74 percent stake in Ally, formerly known as GMAC.

Treasury also holds $5.9 billion of preferred Ally stock. Counting that stock plus the money already recovered, the government would need another $6.4 billion to break even on its investment in Ally.

Ally's IPO will be the latest in a handful of offerings by government-rescued companies that include GM and insurer American International Group Inc , which is preparing to sell more than $10 billion in stock in mid-May.

The timing and the size of the proposed offering have not yet been determined, a spokeswoman for Ally said.

Treasury said in a statement it agreed to be named as a selling shareholder of Ally's common stock, but retains the right to decide whether to participate in the IPO and at what level.

Ally filed the first set of paperwork with the U.S. Securities and Exchange Commission for a nominal sum, similarly to what GM did in its first filing. The car maker had said it expected to raise up to $100 million but ultimately, including overallotments, raised $23.1 billion.

Filing for a smaller amount initially allows an issuer to evaluate market conditions closer to the time of the IPO, a common practice for big deals.

Ally's net income has bounced up and down in the past few years as the company reported a profit of $1.1 billion in 2010 after a loss of $10.3 billion in 2009 and a profit of $1.9 billion in 2008. Its total net revenue grew 22 percent to $7.9 billion last year after dropping 60 percent the year before.

Apart from Treasury, Ally's stockholders include private equity firm Cerberus Capital Management , with a 9 percent stake, and GM, which owns 4 percent directly and 6 percent through a trust.

Ally's IPO filing did not specify how much the current stakeholders would sell, the number of shares in the offering, the price range, or the exchange on which they will trade.

The filing comes on the same day that the Federal Reserve released the names of other banks and companies that borrowed from its main emergency lending facility during the financial crisis.

Citigroup Inc , Goldman Sachs Group Inc , JPMorgan Chase & Co and Morgan Stanley were listed as the lead underwriters on the offering.

(Reporting by Clare Baldwin and Alina Selyukh in New York and Glenn Somerville in Washington; additional reporting by Deepa Seetharaman in Detroit; editing by Lisa Von Ahn, Derek Caney, Richard Chang and Andre Grenon)

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