Tuesday, December 30, 2008

Cerberus Slips Out As GMAC Gets Bailout

As spokesmen from Cerberus decline comment on their failed investment in GMAC, the recent bailout has them looking to the back door to slip out.

Two years ago it was unknown to Cerberus Capital Management that their purchase of 51-percent stake in GMAC would stand on the brink of bankruptcy. But, with the Fed's forcing conditions upon Cerberus, this offers an easy out for the privately owned company.

As there were talks of a possible merger between General Motors and Chrysler, which Cerberus owns majority stake, now the option appears to be off the table.

One condition placed before Cerberus by the Fed's was that they would reduce their 51 percent stake in GMAC to 33 percent of total equity and 14.9 percent of the voting shares. Also, co-investors of Cerberus would take control of their own holdings with GMAC instead of through Cerberus' fund.

Reuters states:

“It's a good thing for GMAC – it literally throws GMAC a lifeline,” said David Kukla, chief investment strategist on Mainstay Capital Management LLC. “So in that regard it's good for Cerberus and good for GM. They are stakeholders. GMAC desperately needed capital.”

According to someone with direct knowledge who is not authorized to talk publicly, says that the timetable and more details on the transfer will be provided early next year.

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