In a recent letter from Cerberus Capital Management to its investors, the private equity giant admitted that it has "significant concerns" about the health of GMAC, the one-time finance arm of General Motors Corp. (NYSE: GM). In 2006, Cerberus bought 51% of GMAC.
The letter states that "If the credit markets continue to decline and we find ourselves in a prolonged environment of capital market shutdown, GMAC could run into substantial difficulty." On the other hand, Cerberus argues that it bought GMAC so cheaply that it should be able to survive.
I first noticed the story on the excellent finance and macroeconomics blog Calculated Risk, which has posted an excerpt from the letter. The whole letter can be downloaded at Deal Journal, which also discusses the contents of the letter. Interestingly, Cerberus has replied to the post at Deal Journal, saying that "Although we prepare for the worst case scenario, it doesn't mean that it will certainly happen" and that "We also believe that GMAC is a resilient business platform and a survivor with strong long term prospects."
I guess Cerberus didn't want to leave the impression that it was panicked by the state of the credit markets. But somehow I doubt that their denials tell the whole story.
Cerberus admits to 'significant concerns' about GMAC
Recent Posts
- Private equity tries to feast on Lyondell blow-up (1/07/2009)
- New Year's resolution for VCs: Survival (1/05/2009)
BloggingBuyouts is provided for informational purposes only. Nothing on the service is intended to provide personally tailored advice concerning the nature, potential, value or suitability of any particular security, portfolio or securities, transaction, investment strategy or other matter. You are solely responsible for any investment decisions that you make. The contributors who provide the content of BloggingBuyouts may, from time to time, hold positions in the securities discussed at the time of writing and they may trade for their own accounts. Such holdings will be disclosed at the time of writing. By using the site, you agree to abide to BloggingBuyouts' Terms of Use.
