Saturday, December 25, 2010

Chrysler Financial Value Jumped 33% After Treasury's Exit

It’s a Christmas Miracle for Chrysler!


Cerberus Capital Management LP’s sale of Chrysler Financial Corp. values the lender at least 33 percent more than when the U.S. Treasury Department sold its holding to the buyout firm seven months ago.

In a deal that valued the auto lender at $4.75 billion, the Treasury got $1.9 billion from Cerberus in May to pay off Chrysler Financial’s bailout debt. Yesterday’s purchase by Toronto-Dominion Bank values it at $6.3 billion. After the Treasury’s exit, Cerberus injected about $500 million into Chrysler Financial, and plans to keep about $900 million of the lender’s assets, people briefed on the deal said. Without those moves, the firm’s value would be 41 percent higher than in May.

The Treasury’s $700 billion Troubled Asset Relief Program is likely to suffer the “bulk” of its losses from aiding the auto industry, American International Group Inc. and homebuyers, the Congressional Oversight Panel said in a September report. The Treasury, which last week called TARP “one of the most effective crisis-response programs ever,” has said the main focus was to stabilize the financial system.

“We’re not a private-equity fund,” said Tim Massad, the Treasury’s acting assistant secretary for financial stability, about the agency’s management of TARP in an interview last month. “We believe that promoting financial stability means we should exit as soon as we can.”

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