Sunday, November 09, 2008

The Truth About Cerberus Capital? You'll Never Know

BOHICA, Suckaaahs!!!

Bad enough that Cerberus will be a major beneficiary of the upcoming $50Bn taxpayer bailout of the "Big 2.125." Worse: you'll never know who the real beneficiaries of your largesse really are.

Cerberus Capital uses hedge funds as the vehicles in which to invest in various companies. Apparently, the hedge fund known as Cerberus Series 4 is the owner of an 80 percent interest in Chrysler and a related fund owns or controls a 51 percent interest in GMAC. Not surprisingly for a company known for its secrecy, Cerberus has not disclosed which entities actually own the interests in Chrysler and GMAC, has not disclosed what fees Cerberus has taken or accrued from its investments, and has not disclosed what severance payments would have to be made if GM actually acquired Chrysler. For example, would Chrysler CEO Bob Nardelli get another big payday if he’s cut loose in a merger? The interrelationships among GMAC, Chrysler Financial, Cerberus and other entities are also a well-kept secret.

Cerberus is, essentially, a bottom-feeder/vulture...with money. (They also own two of the larger producers of AR-15 rifles for consumers: DPMS and Bushmaster.)

The author, a prominent (and also secretive) BK lawyer from NYC, has a few questions.

--Exactly what is the Cerberus/GM proposal to borrow $10b from the US Treasury in order to fund a merger, the terms of which are also secret? Is it in writing? Where is a copy? What were the proposed terms that were rejected by the current US Treasury? Is another proposal in the works? How is the $10b going to be repaid by two insolvent auto manufacturers?

--What do we know about the financial condition of the proposed borrowers? Where is Chrysler’s current balance sheet and income statement? Surely Chrysler is insolvent on an equitable basis, and probably insolvent on a balance sheet basis. Why is basic financial information not available for public inspection and comment?

--Where are the financial statements for the Cerberus Series Four hedge fund? US taxpayers are being asked to bailout the failed auto related investments by Cerberus Series Four, while the profitable investments in the same fund are not being shared with taxpayers.

Oh, yes, it can get worse.

--Assuming Chrysler is insolvent (liabilities exceed assets), then the equity interest of Cerberus and Daimler (the 20 percent equity owner) are worthless and these entities are not even entitled to a seat at the merger negotiating table. The real economic owners of Chrysler are its creditors and employees, who are also in the dark about the proposed US treasury bailout.

--The US taxpayers can’t benefit since there is no repayment plan

--The self-dealing by Cerberus extends to wanting to cherry-pick the Chrysler assets and keep the auto financing arm for itself. What is the value of the Chrysler auto financing business, and why should Cerberus benefit?

A lot of questions with zero, zip, nada for answers.

Curiously, our Congressional "watchdogs" --either (D) or (R) have not barked. I suspect that tells you all you need to know.

That, and this: BOHICA, suckaaahhhh!!

HT: TBerres

No comments: