TTAC Outs Chrysler Investors. For Real.
TTAC has been working with our Best and Brightest to uncover the hidden investors behind Chrysler. We’ve made some headway. First, the name of Cerberus’ Chrysler funds: Cerberus CG Investor I LLC, Cerberus CG Investor II LLC, Cerberus CG Investor III LLC. The information came from Daimler [click here then search for “CG Investor”; it’s under structure of the transaction]. Searching for hits on the CG funds, we’ve unearthed Franklin Templeton Investments’ Mutual Recovery Fund. Here’s the money shot: the fund’s 2008 Annual Report. Scroll down to page 5 (their numbering), second footnote. And there it is. And now we can drill down to some interesting info…
And here’s something else that’s curious. Scroll down to the bottom of page 27 (their numbering). Those same amounts are listed as “Corporate Bonds and Notes.” It appears that Cerberus has agreed to pay Franklin Templeton 12 percent on this investment on 7/31/14.
I leave it to our Best and Brightest to further interpret/explain (please!) the implications of this data. Meanwhile, another hit, in my backyard no less: the Factory Mutual Insurance Company of Johnston, RI. Search within the document for “Cerberus.” It appears pals at Morgan Stanley (another thread revealed) sold Factory Mutual $1.6m worth of CG goodness.
Here’s another one: York Enhanced Strategies Fund, LLC. They own $12m of “Cerberus CG Investor, LLC”, as seen on a SEC form N-Q filing.
The information raises some interesting questions. Well, lots. How was the original deal structured? Why are there three separate funds? Were these investors co-investors in the original Chrysler purchase, or “general” investors in Cerberus assuming risk? How much Chrysler-related paper does Cerberus own? Who owns the majority?
Thanks to Phil Turland and Brian E for the detective work. A quick email from Cerberus (firstname.lastname@example.org) to clarify these issues would be most appreciated.
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I'm late to this conversation, but this sure sounds like some sort of conspiracy theory group. Cerberus is a private equity firm which is pretty much like it sounds. They take in private (read individual, not secretive) investments and then use that pool of capital to purchase or invest in companies. I am no expert in the PE world, but have worked with a few in a consulting role. If you have enough money, it is relatively simple for anyone to become an investor in a private equity fund. Depending on the PE company, the hurdle could be tens or hundreds of thousands or even millions. Investors could be the rich who are looking for additional opportunities outside the stock market, or pension funds, colleges, etc. There is nothing at all nefarious about the multiple funds that some people seem to think means something. PE firms start up new funds periodically to raise a chunk of money and it is generally invested separately from previous funds. Basically, they will decide to start, say, a new $100 million dollar fund and when they get that amount raised, they start buying and selling portfolio companies or portions of them. If you are bought into Fund 4, you win or lose based on that portfolio's performance. What happens in Fund 3 really is irrelevant to you as an investor. After some period of buying, holding, and selling companies the fund is, many times, finished after the last sale and the profits (hopefully) disbursed to the investors. Some PE firms are specific in the types of investments they make, such as retail, manufacturing, etc. and sometimes the individual fund will be as well. Other times the fund is made up of a mix of different portfolio companies. Generally speaking, PE firms are looking for distressed or undercapitalized companies that can be turned around or merged into other portfolio companies to create synergies. Or perhaps a division can get spun off into a more successful standalone company if it isn't encumbered or overshadowed by the current parent. Once they become successful (by whatever criteria) they could go public or be sold to private investors or another PE firm. People seem to want to make Private Equity out to be some sort of exotic investment vehicle, but it is probably the closest to "pure" investing there is outside of buying a company yourself. A bunch of people pool their money in a PE fund and then their (the PE firm's) smart people figure out what companies to buy and how they can improve them so that they can be sold for more later.