Cerberus Seeks Buyers for Chrysler Financial as Auto Loans Rebound

Strategic Insights -

Cerberus Capital Management LP is seeking buyers for its auto lender Chrysler Financial, which has a book value of about $6 billion or $7 billion. The private-equity firm acquired Chrysler Financial as part of its takeover of Chrysler LLC in 2007. With the US auto market recovering, banks such as Wells Fargo & Co. and JPMorgan Chase & Co. are likely to be interested in expanding their auto lending business. Cerberus is exploring options to sell the company, which has repaid its $1.5 billion in US Treasury Department bailout funds and is seeking to return to large-scale lending.

Key Takeaways:

  • Cerberus Capital Management LP is seeking buyers for Chrysler Financial, its auto lender with a book value of about $6 billion or $7 billion.
  • Chrysler Financial was acquired by Cerberus as part of its takeover of Chrysler LLC in 2007.
  • The US auto market is recovering, with improved used-car market and more conservative underwriting standards reducing losses on bad loans.
  • Banks such as Wells Fargo & Co. and JPMorgan Chase & Co. are likely to be interested in expanding their auto lending business.
  • Cerberus hired New York-based JPMorgan, Citigroup Inc., and Sandler O'Neill & Partners LP to help it run the auction.
  • Chrysler Financial had $26 billion of loans and had issued less than $100 million of new loans in the first half of this year.
  • Cerberus founder Stephen Feinberg's bet on the US auto industry is being unwound with the potential sale of Chrysler Financial.

Statistics:

  • Chrysler Financial has a book value of about $6 billion or $7 billion.
  • The company had $26 billion of loans and had issued less than $100 million of new loans in the first half of this year.
  • Cerberus acquired a majority stake in Chrysler for $7.4 billion from DaimlerChrysler AG in 2007.
  • Chrysler Financial repaid its $1.5 billion in US Treasury Department bailout funds last year.

Sources:

  • Bloomberg News
  • Sources with knowledge of the matter
  • Gerard Cassidy, analyst at RBC Capital Markets
  • Peter Duda, spokesman for Cerberus
  • Mary Eshet, spokeswoman for Wells Fargo
  • Capital One Financial Corp.
  • Banco Santander SA
  • 2010 Toronto Star