Chrysler Financial's Value Soars as Toronto-Dominion Snaps Up Lender

Strategic Insights -

The value of Chrysler Financial Corp. has skyrocketed, reaching at least 33% more than its value when the U.S. Treasury Department sold its holding to Cerberus Capital Management LP seven months ago. The Treasury's decision to sell its stake in the lender, which valued Chrysler Financial at $4.75 billion, has been met with a new buyer, Toronto-Dominion Bank, valuing the auto lender at $6.3 billion.

Key Takeaways:

  • The sale of Chrysler Financial Corp. to Toronto-Dominion Bank values the lender at $6.3 billion, a 33% increase from its value when the U.S. Treasury Department sold its holding to Cerberus Capital Management LP in May.
  • The Treasury Department received $1.9 billion from Cerberus in May to pay off Chrysler Financial's bailout debt, with the agency ultimately deciding to exit the business due to a willing buyer and a desire to resolve its bailout holdings quickly.
  • Cerberus injected approximately $500 million into Chrysler Financial after acquiring the lender from the Treasury, and plans to retain around $900 million of the lender's assets.
  • Without the injection of capital and retention of assets, the firm's value would be 41% higher than in May.
  • The sale of Chrysler Financial Corp. is likely to result in significant losses for the Treasury's Troubled Asset Relief Program, as the Congressional Oversight Panel estimated in a September report.
  • The Treasury's management of TARP prioritizes exiting the program as soon as possible to promote financial stability, according to acting assistant secretary Tim Massad.
  • The sale of Chrysler Financial Corp. may be influenced by General Motors Co.'s recent agreement to buy auto-lender AmeriCredit Corp. for $3.5 billion, which valued the latter at 46% more than its book value.

Statistics:

  • $4.75 billion: Value of Chrysler Financial Corp. when the U.S. Treasury Department sold its holding to Cerberus Capital Management LP in May.
  • $6.3 billion: Value of Chrysler Financial Corp. after its purchase by Toronto-Dominion Bank.
  • $500 million: Amount injected into Chrysler Financial by Cerberus after acquiring the lender.
  • $900 million: Amount of assets Cerberus plans to retain from Chrysler Financial.
  • 33%: Percentage increase in Chrysler Financial's value after being sold to Toronto-Dominion Bank compared to its value in May.
  • 41%: Percentage increase in Chrysler Financial's value without the injection of capital and retention of assets.
  • $3.5 billion: Value of AmeriCredit Corp. after being acquired by General Motors Co.
  • 46%: Percentage increase in AmeriCredit's value compared to its book value.
  • $1.9 billion: Amount received by the Treasury from Cerberus in May to pay off Chrysler Financial's bailout debt.
  • $700 billion: Total value of the Troubled Asset Relief Program.

Sources:

  • Bloomberg News
  • Cerberus Capital Management LP
  • U.S. Treasury Department
  • Toronto-Dominion Bank
  • Congressional Oversight Panel
  • CreditSights Inc.
  • Fiat SpA
  • General Motors Co.