Investors have yet again balked at buying loans backed by the buyout of Chrysler by Cerberus Capital Management, signaling the debt market freeze is far from over.
When JP Morgan, Citigroup, Goldman Sachs, Morgan Stanley and Bear Stearns in late July attempted to syndicate $10 billion in Chrysler-related loans and failed, it was widely regarded as a bellwether for the LBO loan market and future financing structures in mega deals.
The banks successfully sold $6 billion-worth in August at a discount of 95 cents on the dollar, but this week were reportedly unable to find investors to buy the remaining debt on their balance sheets. Cerberus’ lenders attempted to unload $4 billion in Chrysler-related loans at roughly 97 cents on the dollar and failed, a person familiar with the matter told the Wall Street Journal.
The failure to sell Chrysler LBO loans reportedly follows similar trouble encountered last week by the lenders for TPG’s and Goldman Sachs’ $27.5 billion buyout of telecom company Alltel. The lending consortium practically halved the amount of debt for sale, from as much as $6 billion to $3.2 billion, according to Bloomberg.