Cerberus saying goodbye to Chrysler Financial

Dec 21, 2010

Dan Primack was a senior editor at Fortune from 2010 to 2016. He was also the author of Term Sheet, Fortune's daily newsletter about deals and dealmakers.

Cerberus just announced that it has agreed to sell auto-loan company Chrysler Financial to TD Bank (td) for $6.3 billion.

According to a press release, the dollar total is "comprised of net assets of $5.9 billion and approximately $400 million in goodwill."

TD Bank doesn't plan to issue any new common equity.

I'm working on figuring out exactly what this means for Cerberus from a return perspective, but my back of the envelope math looks like this: Cerberus originally paid $7.4 billion for an 80% stake in Chrysler Holdings, which included both the auto-making and finance units. It was Cerberus' largest-ever investment, even though only around $1.3 billion of the purchase price was equity from Cerberus.

The private equity firm obviously got goose-egged on the car piece, but this deal with TD would seem to repay a majority of its original investment.

[UPDATE: I've gotten a bit more info on the math. Seems that certain Chrysler Financial assets are excluded from the deal, including a foreclosure unit and another group involved in auto insurance. Cerberus values those pieces, in aggregate, at approximately $940 million. In other words, the book loss as of today is just around $70 million, or less than 1% of the original Chrysler buyout value.]

Still a lousy deal for Cerberus, but not anything close to the disaster that most folks once assumed...

For more information, TD Bank has put together a set of presentation materials for its conference call. View them here.

All products and services featured are based solely on editorial selection. FORTUNE may receive compensation for some links to products and services on this website.

Quotes delayed at least 15 minutes. Market data provided by Interactive Data. ETF and Mutual Fund data provided by Morningstar, Inc. Dow Jones Terms & Conditions: http://www.djindexes.com/mdsidx/html/tandc/indexestandcs.html. S&P Index data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Terms & Conditions. Powered and implemented by Interactive Data Managed Solutions