Chrysler deal downshifts

Posted Jul 18th 2007 7:40AM by Tom Taulli
Filed under: Daimler (DAI), Private Equity

Private equity operators are crossing their fingers. Will the debt markets have enough capacity to fund the billions and billions of recent buyout deals?

As a result, there's quite a bit of attention on the massive deal for Chrysler, which is being spun off by DaimlerChrysler (NYSE: DCX).

Well, according to a piece on Bloomberg.com, there are some bumps in the road.

On a $10 billion loan, the private equity firm, Cerberus, wanted to get a juicy rate of 3.25% (above the London interbank rate). But there were not enough takers. So, the new offer is 3.75%. And, as for another $2 billion loan, Cerberus tried to get 6% (above Libor), but has now upped it to 7%.

This certainly seems reasonable. Despite the extreme liquidity in global markets, there are still limits.

Besides, Chrysler is not a slam dunk deal. The competition is brutal and the employee benefits are onerous.

But, it still looks like the deal is on track – although, it's not going to be cheap.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

Tags: Cerberus, Chrysler Group, ChryslerGroup, DCX