Cerberus took 2 very large bets on GMAC and Chrysler, both of which are looking quite weak. Having written a >$6B equity check for 51% GMAC and having bought 80% of chrysler for >$7B (including $18B in pension related liabilites). Given that Cerberus is has ~$26B AUM, these two deals make up a substantial portion of their portfolio. I have a hard time envisioning scenarios where they get out of this whole. Frankly, they stand a good chance of having both of these companies go under. Recent press indicates that they are looking to capture the remaining 49% of GMAC by merging GM and Chrylser. I don’t really see how this meaningfully resolves the severe issues that these autmakers face, nor does it resolve the pending deep recession where car buyers and borrowers will be hard to come by. Am I missing something here, or is this fund in real trouble?
They are looking for gov’t help. Stay tuned. Details by Christmas…
I wonder if they have anybody lobbying for this…
according to the latest hedge fund details, they are down 0.3% YTD, you can assume what they think of there assets…
I thought Cerberus’ game was to buy up these failing behemouths because it figured it could chisel down the pension obligations.
I wouldn’t rely on headlines numbers for any of this. Cerberus was essentially paid to take Chrysler.
What was the firm that bought that big stake in Washington Mutual? They threw a few billion down the toilet in record time.
TPG - Texas Pacific Group
Have a look at this… interesting move… http://www.bloomberg.com/apps/news?pid=20601087&sid=aOhfsjc2HmwQ&refer=home
Not to mention the number of pending class action lawsuits against GMAC.
I think it is more likely that Cerberus will fully acquire GMAC and Chrysler finance…after a deep restructuring, those companies may even have a higher rating and hence cheaper funding
bsivia Wrote: ------------------------------------------------------- > according to the latest hedge fund details, they > are down 0.3% YTD, you can assume what they think > of there assets… How could Cerberus be down only 0.3%? That’s some really slimy valuation going on there, probably some Bernanke approved “held to maturity” valuation or something.
JoeyDVivre Wrote: ------------------------------------------------------- > They are looking for gov’t help. Stay tuned. > Details by Christmas… I think govt help has gone too far already. Very soon, US will have more state-run enterprises than China.
I see Dan Quayle, John Snow are involved. I’m sure these guys will have no trouble getting some govt help.
fsa-sucker Wrote: ------------------------------------------------------- > JoeyDVivre Wrote: > -------------------------------------------------- > ----- > > They are looking for gov’t help. Stay tuned. > > Details by Christmas… > > I think govt help has gone too far already. Very > soon, US will have more state-run enterprises than > China. Well, Hugo Chavez calls him “Comrade Bush”. He nationalized the banks and pretty soon will nationalize the auto industry.
there is simply not enough room for 3 big domestic auto makers, someone has to leave town. I would also argue these guys need to dratically alter their business models to compete effectively. Japanese are blowing them away. Maybe bankruptcy and a complete restructuring (including unions) with a huge reduction in capacity is in order here.
So bankruptcy of GM means that they default on $150B in bonds and trigger $1T worth of CDS. It means laying off tens of thousands of well-paid American workers and a massive shift of wealth to essentially unproductive lawyers. It means dumping pesnion and medical guaranties on the Federal govt. It means increasing our trade deficit as more and more dollars stream out of the country to buy big heavy foreign cars and ship them to the US, an area in which we should have a huge competitive advantage. It means havng difficulty providing incentives to manufacturers to develop energy efficient and non-polluting cars. It means cutting out lots of research capacity that has originated all kinds of important innovations that increase safety, drivability, and efficiency. A GM bankruptcy would be a disaster. I can’t wait to watch.
GMAC’s cost of debt has precipitously increased since the Cerberus acquisition. Loaning money to consumers and “gaining” a security interest in GM vehicles is not exactly comforting business model from the credit agencies’ perspectives.
I would not bet on Cerberus. In Greek and Roman mythology Cerberus was employed as Hades’ loyal watchdog, and guarded the gates that granted access and exit to the underworld.
Yeah, they have frequent misgivings on the choice of names. Probably should have gone with “Elm Tree” or “Frontier” or “Mountain Top” or some other innocuous name.