Home Equity Loan Morgages

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GMAC

Cerberus acquired 51 percent of GMAC from General Motors in 2006 for $7.4 billion. ^[4]

In 2006, Cerberus appointed Merkin as nonexecutive Chairman.^[7]

As of October 15, 2008, GMAC had $173 billion of debt against $140 billion of income-producing assets (loans and leases), some which are almost worthless, in addition to GMAC Bank’s $17 billion in deposits (a liability). Even if GMAC liquidated the loans and leases, it couldn’t pay back all of its debt.^[8]

In a statement, on December 10, 2008, GMAC said, "GMAC LLC, the auto and home lender seeking federal aid, hasn’t obtained enough capital to become a bank holding company and may abandon the effort, casting new doubt on the firm’s ability to survive. A $38 billion debt exchange by GMAC and its Residential Capital LLC mortgage unit to reduce the company's outstanding debt and raise capital hasn’t attracted enough participation." This was due in part because Cerberus had raised the credit requirements for car loans so high, virtually eliminating leasing, that they have been responsible for a sizable chunk of lost sales at GM due to customers inability to secure financing, in order to pressure GM into selling or trading their remaining stake in GMAC. ^[9] GM stands to write-off over a billion dollars in lost residuals– which they paid up front to GMAC. GMAC's exposure to the gap in residual values is around $3.5 billion. ^[10]

In December, 2008, Cerberus subsequently informed GMAC’s bondholders that the financial services company may have to file for bankruptcy if a bond-exchange plan is not approved. The company had previously said it may fail in its quest to become a bank holding company because it lacks adequate capital.^[4]

In January, 2009, Merkin resigned from his chairmanship as a condition by the U.S. government. ^[11]

Five days earlier, the Federal Reserve granted GMAC bank holding company status, so it could get access to the bailout money. ^[12]

On December 29, 2008, the U.S. Treasury gave GMAC $5 billion from its $700 billion Troubled Asset Relief Program (TARP).

Notable acquisitions

• Pharmaceuticals - In December 2004, the company announced the acquisition of Bayer's Blood plasma products business and renamed it Talecris Biotherapeutics.

• Paper products - The company acquired MeadWestvaco's paper business for $2.3B in 2005 and renamed it NewPage Corporation. Cerberus also purchased, from Georgia Pacific Corporation, its Distribution Division/Building Products and all of its associated real estate. It renamed this new company BlueLinx Holdings, based in Atlanta, Georgia.

• Government Services (Military, Energy, and Food & Drug) - owns IAP Worldwide Services, which bought Johnson Controls' World Services division in February 2005, and Netco Government Services.

• Real Estate - Through investment affiliate Cerberus Real Estate, the company has been making direct equity, mezzanine, first mortgage, distressed and special situation investments in all asset types. It also controls Miami Beach, Florida-based LNR Property, a large real estate development and investment firm through subsidiary Riley Property. Cerberus also controls Kyo-ya, a Japan based group of entities that owns several Starwood managed assets in California, Hawaii and Florida.

• Retail - Cerberus purchased 655 of the 2,500 New Albertsons, Inc., grocery stores, forming Albertsons LLC of Boise, Idaho, in June 2006. They also had an ownership stake in the now-bankrupt Mervyn's department stores, which was acquired from Target Corp. In June 2007, Cerberus acquired Torex Retail Plc., a retail solutions provider in troubled waters, for approximately 400 million US dollars.^[13]

• Transportation - Acquired bankrupt ANC Rental, then owner of the National Car Rental and Alamo car rental chains, for $230 million in October 2003 and purchased DaimlerChrysler's 45% share of debis AerFinance, an aircraft leasing business, in May 2005. Complete acquisition of debis AirFinance (later renamed AerCap) was concluded in July 2005. Also acquired North American Bus Industries, Optima Bus Corporation, and Blue Bird Corp. in the bus manufacturing sector. Cerberus also owns bus companies Coach America and American Coach Lines, which were acquired from Stagecoach Group.

• Automotive - Peguform, GDX Automotive, and Chrysler.

• Financial Services - General Motors sold a 51% stake in its GMAC finance unit to an investor group led by Cerberus Capital Management in November 2006. GM expected to receive $14 billion over the next three years from the sale of General Motors Acceptance Corp. In December 2006, Cerberus acquired the Austrian bank BAWAG P.S.K. for a reported EUR3.2 billion. In August 2007, Cerberus announced that it was closing one of their mortgage companies, Aegis Mortgage. It owns half of a 9.9 % share (5%) with the Gabriel Group in Bank Leumi.^[14]

• Firearms - Acquired Bushmaster Firearms, Inc., from Windham, Maine native Dick Dyke for an undisclosed sum in April 2006, and purchased Remington Arms in April 2007. Under Cerberus direction, Bushmaster Firearms acquired Cobb Manufacturing, a well-respected manufacturer of large-caliber tactical rifles in August 2007. Cerberus also acquired DPMS Panther Arms December 14th 2007.^[15]
• Entertainment - Acquired a group of seven television stations, Four Points Media Group, from CBS Corporation in 2007.^[16]

• Other holdings of the investment group include Formica, Inc., and the Aozora Bank in Japan; and cable operator Galaxy Cable.

• In 2007 Cerberus took over Corvest a promotional products company based out of Largo, FL with arms based in Simi Vally, Ca & Thorfare, NJ.

Broken Deal for United Rentals

In the summer of 2007, Cerberus agreed to buy 100% of United Rentals, the world's largest equipment rental company and traded on the NYSE. After the credit markets began to tighten in August, Cerberus attempted to reduce the deal price. United Rentals refused to reprice the deal, and in November sued in the Delaware Court of Chancery for specific performance (i.e., a court mandate that Cerberus complete the deal). Cerberus took the position that the deal agreements capped its liability for walking away from the deal at $100 million. After a two-day trial, Delaware Chancellor William B. Chandler, III ruled for Cerberus in a closely watched decision, allowing it to pay United Rentals the agreed-upon $100 million "reverse termination fee" and terminate the merger agreement. ^[17]

Notes and references