Dan Primack

The latest on private equity, M&A, deals and movements — from Wall Street to Silicon Valley

Cerberus saying goodbye to Chrysler Financial

December 21, 2010: 7:46 AM ET

Cerberus just announced that it has agreed to sell auto-loan company Chrysler Financial to TD Bank (TD) for $6.3 billion.

According to a press release, the dollar total is "comprised of net assets of $5.9 billion and approximately $400 million in goodwill."

TD Bank doesn't plan to issue any new common equity.

I'm working on figuring out exactly what this means for Cerberus from a return perspective, but my back of the envelope math looks like this: Cerberus originally paid $7.4 billion for an 80% stake in Chrysler Holdings, which included both the auto-making and finance units. It was Cerberus' largest-ever investment, even though only around $1.3 billion of the purchase price was equity from Cerberus.

The private equity firm obviously got goose-egged on the car piece, but this deal with TD would seem to repay a majority of its original investment.

[UPDATE: I've gotten a bit more info on the math. Seems that certain Chrysler Financial assets are excluded from the deal, including a foreclosure unit and another group involved in auto insurance. Cerberus values those pieces, in aggregate, at approximately $940 million. In other words, the book loss as of today is just around $70 million, or less than 1% of the original Chrysler buyout value.]

Still a lousy deal for Cerberus, but not anything close to the disaster that most folks once assumed...

For more information, TD Bank has put together a set of presentation materials for its conference call. View them here.

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About This Author
Dan Primack
Dan Primack
Senior Editor, Fortune

Dan Primack joined Fortune.com in September 2010 to cover deals and dealmakers, from Wall Street to Sand Hill Road. Previously, Dan was an editor-at-large with Thomson Reuters, where he launched both peHUB.com and the peHUB Wire email service. In a past journalistic life, Dan ran a community paper in Roxbury, Massachusetts. He currently lives just outside of Boston.

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