Does anybody have a clue what kind of numbers are involved in the Chrysler-Cerberus
deal? On Monday, the WSJ’s Dennis
Berman told us that Cerberus was spending a total of $7.4 billion: $5 billion
to the new company, $1.05 billion to the financial business, and $1.35 billion
to Daimler. Meanwhile, Daimler is getting that $1.35 billion, but spending or
loaning a total of $1.6 billion, which means it’s actually paying money to get
rid of the asset.
With me so far? If you take the $6.05 billion that Cerberus is putting into
the company, and add the $1.6 billion "cash outflow" from Daimler,
the total amount of money being spent seems to come to $7.65 billion.
Yet today Dana
Cimilluca manages to pull some much, much bigger numbers from somewhere:
The underwriters of the $50 billion to $65 billion in debt that will be raised
to help finance the deal and Chrysler’s operations going forward may
share fees in the neighborhood of $320 million, according to Thomson/Freeman.
$50 billion to $65 billion in debt? Where did that come from?
I understand that Cerberus is going to want to invest money in Chrysler going
forwards, and that it might lose money during that time. But still – $65
billion is one hell of a lot of money, and dwarfs even the $18 billion in pension
liabilities that Daimler was seemingly so keen to get rid of. Add on $5 billion
or so in equity, and you have yourself a $70 billion deal.
It seems to me that Chrysler is valued at, approximately, zero. Who on earth
is going to lend $65 billion to a loss-making company with no clear turnaround
plan as of yet? Or does Chrysler already have a vast amount of debt outstanding,
and now Cerberus wants to refinance it all? I have to admit to being utterly
confused.