Daimler Says Hitch Won't Derail Chrysler Sale

DaimlerChrysler's $7.4 billion deal to sell 80% of Chrysler to hedge fund Cerberus Capital Management is still on, despite the difficulty its bankers are having raising the money needed for the buyout. Investors are proving reluctant to accept the terms for $12 billion in loans that were meant to finance the purchase and Chrysler's restructuring. The New York Times quotes a "person with direct knowledge" as saying the banks, led by JPMorgan Chase, have agreed to take on the debt themselves and sell it later. "We are completely within the anticipated time schedule for the closing," said DaimlerChrysler CEO Dieter Zetsche during DaimlerChrysler's Q2 earnings call. A Cerberus spokesman also confirmed the deal will close on schedule. Bond fund manager Bill Gross has said several times recently that Chrysler might have trouble raising money because problems in the mortgage market have made investors more cautious. "Those that assert that this is merely an isolated subprime crisis should observe very closely the price and terms that lenders are willing to accept with Chrysler finance this week," Gross wrote Wednesday on his company's website (see full summary). "That more than anything else may...tell them that their world has suddenly changed." DaimlerChrysler shares closed up 4% at $93.02.

Sources: New York Times, Reuters
Commentary: Chrysler Struggling to Raise $20 Billion in Loans -- WSJ • Borrowing Costs Rising in Chrysler, Other Buyout Deals • Cerberus' Acquisition Makes Chrysler Circle The Wagons
Stocks/ETFs to watch: DCX. Competitors: F, GM, TM. ETFs: DPC, RXI, EWG

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