Cerberus close to break-even on Chrysler: source

By Megan Davies

NEW YORK (BestGrowthStock) – Cerberus’ deal to sell Chrysler Financial to Toronto-Dominion Bank means that the private equity firm will end up close to break-even on its investment in Chrysler as a whole, a source close to Cerberus said.

Cerberus is selling the auto-lending unit for $6.3 billion and is retaining close to $1 billion of non-auto lending assets, the source said.

The private equity firm, along with a consortium of co-investors, originally bought a 80.1 percent stake in car maker Chrysler and its financing arm Chrysler Financial in May 2007 for $7.4 billion.

Private equity firms typically buy companies in order to turn them around in 3 to 5 years — or less if possible. They return profit on the sale of assets to the investors in their funds, which are typically pension and endowment funds.

However, Cerberus’ acquisition of Chrysler, the smallest of Detroit’s three automakers, took a different, more troubled course.

Chrysler was pushed to the brink of liquidation in 2009 before a bailout that was the subject of intense debate within the Obama administration.

Cerberus lost control of the automaker during its restructuring but held on to the financing company.

During the upheaval, the car maker’s then chief executive, Bob Nardelli, said that Cerberus would forgo “any benefit from the upside that would, in part, be created from any government assistance that Chrysler LLC may obtain.”

Chrysler received some $14 billion in U.S. taxpayer funding. It emerged from bankruptcy protection in June under management control of Italy’s Fiat SpA.

Chrysler’s fortunes have since improved. It posted a third-quarter operating profit of $239 million and is aiming for an initial public offering in late 2011, sources familiar with the matter previously told Reuters.

(Editing by Gary Hill)

Cerberus close to break-even on Chrysler: source