Someone Wants To Buy Chrysler Debt?
True story. Market Watch reports that Goldman Sachs has sold $500m worth of Chrysler debt at a discount, reducing its exposure to the troubled firm. The investment house– which underwrote Cerberus' purchase of Chrysler along with JP Morgan, Citigroup, Morgan Stanley and Bear Stearns– sold the loans at the discount price of $.63 (they currently trade between $.64 and $.66). Sources close to the deal (as opposed to those with a faraway look in their eyes) say Goldman Sachs made the sale to an investor group that included hedge funds. Goldman had already sold some $300m of its $1.6b exposure to Cerberus' $7b first-lien loan (used to buy the automaker from DaimlerChrysler). As disconcerting as the fire sale is for Chrysler, it actually signals an improvement. In August and November of last year, underwriters collectively failed to find interest in $2b and $4b chunks of Chrysler debt at any price. The risky debt now returns some 20 percent on investment; which helps investors accept the clear and present danger inherent in holding debt for the struggling American automaker. Good luck with that.
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