Cerberus Chief Not Leading GMAC Bailout Effort: Source
Published reports that Cerberus Capital Management Chief Steve Feinberg is leading the charge for more governments funds to bail out GMAC are flat out wrong, a source tells CNBC.
The government is ordering GMAC , General Motors' financing arm, which is now a bank holding company, to raise $11.5 billion in new capital — roughly half its total equity. It likely will have to look to the government for the funds.
"Unintentionally, Cerberus ended up in the middle of a debacle they really could not have foreseen," said Elizabeth Nowicki, associate professor of business law at Tulane University Law School. "This is absolutely not going to crush Cerberus, nor do I think it's going to deter their capital raising. It is going to make it a lot harder."
And even with Chrysler forced into bankruptcy, the private equity firm could still see gains on the deal because the Chrysler financing arm is not part of the Chapter 11 filing and will continue to collect on existing Chrysler car loans.
Cerberus reduced its stake in GMAC from 51 percent to its current minority position in December 2008, part of the condition that led to the financing company's conversion to a bank holding company, and access to over $5 billion in TARP funds.