Contact Us

Home> International News> News detail

Cerberus secures $62B refinancing for Chrysler

From detnews| May 21,2007

Cerberus Capital Management on Friday said seven major North American banks and investment banks have agreed to raise the $62 billion needed to refinance the debt and recapitalize Chrysler Group.

The New York-based private equity firm announced on Monday it would acquire the U.S. automaker from Germany's DaimlerChrysler AG for $7.4 billion. But Cerberus revealed little else about how it would finance the takeover.

The mix of financing will include securities backed by the Chrysler's automobile assets, high-yield corporate debt, and bank loans, said Cerberus spokesman Peter Duda. Leading the financing is JPMorgan Chase & Co., Goldman Sachs Group Inc., Citigroup Inc., Morgan Stanley, Bear Stearns Cos., Toronto-Dominion Bank and the Royal Bank of Canada.

Some $50 billion of proceeds will be used to refinance debt at Chrysler's financing unit. The amount will be the largest refinanced by a private equity firm, according to financial data tracker Dealogic.

DaimlerChrysler Chief Financial Officer Bodo Uebber said during a conference call on Monday that the new Chrysler would likely carry a "BB" junk rating after it splits from DaimlerChrysler, which has a "BBB" investment-grade rating. The lower rating would equate to higher borrowing costs.

As part of the $62 billion financing, the banks have agreed to secure $12 billion in loans that Cerberus can draw from to help in the restructuring. It was not known how the banks would split that amount.

As part of the $7.4 billion takeover price for the deal, Cerberus agreed to contribute $5 billion directly to the carmaker and $1.05 billion would be pumped into its financing arm. DaimlerChrysler will receive roughly $1.35 billion of the amount.

But other expenses to be absorbed by Daimler mean the German company's net cost of getting rid of the money-losing U.S. unit will actually rise to as much as $1.5 billion. That includes a $400 million loan, among other payments, as part of the transaction.

Daimler also is on the hook to pay $1 billion into Chrysler's pension fund should the fund be terminated within five years of the sale. Cerberus said it would pay $200 million into the pension fund, which would come out of the deal price.

All Rights Reserved. Do not reproduce, copy and use the editorial content without permission. Contact us:

Install Gasgoo APP

Anytime and anywhere to know the dynamics of China's auto industry

Hot Auto Products| e-Catalog| Auto Products Directory| Auto Parts Manufacturers|

Gasgoo Site: Automotive News| 中文站| 汽车资讯| 出口供应商| 汽车社区|

Copyright Notice © 2016 Corporation and its licensors. All rights reserved.