The Wall Street Journal is reporting that the sale of $12 billion in debt related to the Cerberus Capital purchase of Chrysler Group from DaimlerChrysler (NYSE: DCX) has been postponed. Apparently the debt underwriters -- including J.P. Morgan Chase (NYSE: JPM), Citigroup (NYSE: C), Goldman Sachs Group (NYSE: GS), Bear Stearns (NYSE: BSC) and Morgan Stanley (NYSE: MS) -- have been unable to find buyers for the debt, which is part of a $20 billion loan package planned for Chrysler. The money will be used in Chrysler's production and finance operations.
This setback for the debt sale offers further evidence that liquidity is drying up and deals are becoming more expensive. Interest rates on these debt-fueled loans have been climbing rapidly, and are now headed toward 10% and higher. However, even at these rates, Cerberus's bankers had trouble finding buyers. As a result, the bankers will provide $10 billion in loans from their own pockets, with plans to sell the debt to the public at a later date. Cerberus and Daimler will kick in another $2 billion.
Cerberus and its bankers have stated that this financing problem will not delay the closing of the deal, which is scheduled for August 3.
Chrysler debt sale postponed
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