Cerberus saying goodbye to Chrysler Financial

Dec 21, 2010

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.

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