Cerberus Capital Management: no bark, no bite

[metapunditedgy]

Remember Cerberus Capital, the investment firm heavy with GOP insiders (e.g., Snow, Quayle) at the top?
http://en.wikipedia.org/wiki/Cerberus_Capital_Management

Apparently GOP political influence wasn't enough to make big money. I wonder who the big investors were?

Via Zero Hedge and WSJ:
Cerberus Capital Management's investors overwhelmingly want out of the firm's core hedge funds, asking for the return of more than $5.5 billion, or almost 71% of the fund assets, according to people familiar with the matter.

Mr. Feinberg has personally called Cerberus clients over the past two weeks to discuss his firm's plans to retool the Cerberus Partners hedge funds, which make up about one-third of the firm's total assets. The hedge funds hold roughly $7.7 billion in assets in two side-by-side vehicles, one domestic and one offshore.

Cerberus in recent days has tried to convince investors -- called limited partners in the private fund business -- to transfer assets to the new follow-on fund, called Cerberus Partners II. Since December, Cerberus has declined to pay out cash, saying that weak market conditions would mean low prices if it sold holdings.

"Unfortunately a number of our LPs have indicated that they cannot invest in Cerberus Partners II LP without quarterly liquidity," Mr. Feinberg wrote in the most recent letter. "In our view, given the current general illiquidity in the distressed markets, it would be practically impossible for a distressed investment fund to provide quarterly liquidity for 100% of its capital."

http://www.zerohedge.com/article/dan-quayle-can-not-save-cerberus
http://online.wsj.com/article/SB125148681701267563.html

[corkhead]

1. WOOH WOOH!

here comes the Karma train

bloodsuckers.

[SoCalDem]

2. They certainly did Chrysler no favors, now did they?

and Chrysler did them no favors, in return:)

Cerberus in Salvage Mode on Chrysler
April 1, 2009, 7:40 am
http://dealbook.blogs.nytimes.com/2009/04/01/cerberus-tries-to-salvage-what-it-can-from-chrysler/

For Stephen A. Feinberg, the long road back from the most disastrous investment of his career — Chrysler — began last week around a polished wood table inside the Treasury Department. It was not the road he had envisioned when his private investment firm, Cerberus Capital Management, bought Chrysler in the summer of 2007, The New York Times’s Louise Story writes. Back then, Mr. Feinberg was hailed as a hero — the Wall Street financier who just might save the American car industry. Instead, he lost billions for his investors and co-investors. And last week it became clear that he would lose Chrysler’s auto operations, as well.

So as the Obama administration prepared to assert control over Chrysler and General Motors, Mr. Feinberg flew to Washington to try to salvage what he could. In a midweek meeting with Treasury officials, Mr. Feinberg agreed to give up the 80.1 percent stake in Chrysler held by Cerberus and its co-investors, The Times said, citing a person briefed on the negotiations. He first offered to do this last year. But Mr. Feinberg did not go quietly. He also discussed additional federal money to help his other wayward investments in Detroit: GMAC and Chrysler Financial. Cerberus is now pushing the government to help orchestrate a merger of the two auto financing companies — a move that might eventually yield a profit for Cerberus.

snip

“There was a certain degree of hubris here,” John Gabbert, the chief executive of PitchBook, a firm that researches private equity, told The Times. Its daring deal for Chrysler vaulted Cerberus, then virtually unknown outside financial circles, to prominence. But now Cerberus — and its investors — are paying the price.

snip

Those co-investors have taken four times the losses in aggregate as Cerberus, and many have already written their stakes down to zero, or pennies on the dollar. A few of them, though, doubled down on GMAC in December, counting on Cerberus to find a way out of the wreck.

snip

Cerberus’s investors in the Chrysler deal include pension funds for public employees in Indiana and for public school employees in Pennsylvania, according to PitchBook. The main path of hope for Cerberus depends on government support for Chrysler Financial, which Cerberus split into a separate company from the automaker. Regulators informally rejected its request to become a bank holding company late last year, even while approving an application for such a conversion by GMAC. Political rancor related to Cerberus contributed to that decision by regulators, The Times said, citing one of the people briefed on the situation. Now Cerberus is pushing the new administration to reconsider.

Cerberus is also pushing the Treasury and the Justice Departments for support of its goal to merge GMAC and Chrysler Financial.

snip

[Greyhound]

3. The curtain slipped open.

None of these know-nothing, MBA run, schemes work unless they have enough capital to dictate the rules and conditions, they only make money in markets they own and that can't work for long.

It takes a car person to run a car company, it takes a film person to run a movie studio, and a music person to run a recording label. I suppose an MBA could run a company that makes the best spreadsheet software, but that's about it.

[metapunditedgy]

7. Well, I'm guessing that the MBAs were planning to fall back on political connections "as necessary."

[leveymg]

4. Cerberus' fortunes were tied to Likud, GOP, and Madoff, still trying to strip the Treasury

Like many vulture capital funds, CCM fed off of the corpses of companies fattened and then killed off by the policies of Right-wing administrations. War produced most of the roadkill, and bad industrial and public finance policy accounted for much of the rest. Then, there were the bailouts. Lots of rotting meat to feast on at the public expense. But, that's a game that can only be played so long.

See,

leveymg's Journal - That was a heckuva deal for Cerberus that ...That was a heckuva deal for Cerberus that bought Chrysler in 2007 for $1.35B. Posted by leveymg in General Discussion Wed May 06th 2009, 02:30 PM ...
http://journals.democraticunderground.com/leveymg/411 - Cached - Similar -

leveymg's Journal - MYTHS ABOUT MADOFF'S “PONZI SCHEME” – Bernie's ...1 post - Last post: Mar 17
Advertise on more than 70 progressive blogs! leveymg's Journal .... In May 2004, Feinberg's private equity group, Cerberus Capital ...
http://journals.democraticunderground.com/leveymg/400 - Cached - Similar -
Show more results from journals.democraticunderground.com

Daily Kos: State of the Nationleveymg's diary :: :: The web connecting major GOP donors to the US .... Cerberus-Gabriel, a large Israeli hedge fund has been identified as the owner of ...
http://www.dailykos.com/story/2007/3/10/21543/2678 - Cached - Similar -

Daily Kos: Larger CIA and DoD Privatization Scandal Emerging from Walter Reed Story, US Attorneys Firing
Larger CIA and DoD Privatization Scandal Emerging from Walter Reed Story, US Attorneys Firing Tweet this submit to reddit ...
http://www.dailykos.com/story/2007/3/10/21556/5045


So long, Cerberus. You were a top vulture, treasury carcass stripper and company killer while you lasted.

[dixiegrrrrl]

5. ooohh....Impressive tracking of the vultures, there, leveymg

I enjoyed perusing your links.

Once in awhile, the karma train passes within eyeshot.
I am more than human enough to enjoy this one.

[leveymg]

6. Surprised this story hasn't gotten more attention.

But, who owns the media conglomerates? Bigger global conglomerates and hedge funds.

No doubt about your humanity. Sometimes I wonder about the Feinbergs, Merkins, and Madoffs and the oligarchs they work for.

[dixiegrrrrl]

8. News headline today that there will be ONE President/Editor

for 7 major newspapers in our area, all owned by the same corporation.
Huntsville, Birmingham, Mobile, Pascagoula, Biloxi, Baldwin Co. and one other i can't remember,
( Montgomery, probably) which is essentially the entire reading area of Ala and the Gulf area.

Nope. I can't figure out why more coverage isn't provided to all this financial theft either. :shrug:

[metapunditedgy]

9. So, I'm trying to understand...

I've heard other claims, and your first post seems to suggest, that the Chrysler investment was actually very beneficial for Cerberus, thanks to the gov't bailout. But if the fund is "only" an $8B fund, how can they be making $7B investments in Chrysler (among other things), profiting hugely, and still losing big money all on an $8B fund?

All the numbers I've seen don't really add up. Who was financing them, and where did the profits go?

[leveymg]

10. Cerberus only put up $1.35 B to buy Chrysler in exchange for $8 B in gov't guarantees to the company

See the first link in my post above.

[metapunditedgy]

11. Yes, that's part of what I'm trying to understand.

I didn't quite understand the info in your link; I see what you're saying now.

The Zero-Hedge/WSJ link says the Cerberus funds were under $8B. Then (according to Wikipedia), there's $7B for GM, plus a lot of other large investments. And that doesn't even account for the hefty salaries/bonuses I'm sure their execs and employees demanded.

Do you know how the numbers add up? Are some wrong, or were they also borrowing to fund these acquisitions?

[Snarkoleptic]

12. .