Cerberus Fights Back Against United Rentals

Cerberus Capital Management, in its latest attempt to scuttle its $4 billion purchase of United Rentals, said it filed a request for declaratory judgment Wednesday in New York State Supreme Court.

The New York private investment firm reiterated its argument that it is only liable for $100 million in damages if it terminates the deal, valued at $7 billion including the assumption of debt.

"United Rentals' position flies in the face of the provisions of the merger agreement and the limited guarantee," Cerberus said in a news release. "The plain text of the documents is directly contrary to United Rentals' position."

United Rentals , in a statement late Wednesday, reiterated that it "stands ready to complete the merger transaction on the agreed-upon terms."

United Rentals, which filed a lawsuit earlier in the week trying to force Cerberus to go through with the transaction, has said Cerberus must either give a justifiable cause for backing out of the deal or complete the purchase.

The spat is the latest example of a leveraged-buyout deal falling victim to havoc in the credit markets. For months, buyout shops have been walking away from deals to buy companies including Acxiom and Harman International Industries.

The United Rentals dispute has been brewing privately for months, according to letters between the companies. Even though the deal was struck after turmoil began in the credit markets in June, Cerberus executive Steven Mayer wrote to United Rentals General Counsel Roger Schwed on Aug. 31 seeking a discussion about the terms. The request was prompted by "our concerns about recent unanticipated developments in the credit and financial markets."

United Rentals replied that financial-market turmoil was specifically excluded as an escape clause in the merger agreement.

The letter also noted that Cerberus' acquisition vehicle already had committed financing from its banks, including Credit Suisse. A spokesman for the Swiss bank had no comment.