2008 Rank: 15
2007 Rank: 9
Recent buyout fundraising: $7.5 billion
In hindsight, founder Steven Feinberg may have bitten off more buyouts than he could chew as he transformed his distressed hedge fund into a private equity shop. Cerberus's $7.4
billion acquisition of Chrysler is plagued by retiree burdens and higher dependence on gas-guzzling pickup trucks than any of the other Detroit Three.
The 2006 GMAC acquisition looked smart before car loan defaults began to rise (they hit a ten-year high at the beginning of the year) and mortgage delinquencies eviscerated the ResCap
division. ResCap has been downgraded to junk, and GMAC bonds are trading below 90 cents.
Even so, the protean firm is finding ways to make money amid disaster by returning to core competencies. It has the cash and skill to make money buying distressed bonds, and its
Ableco lending arm could thrive by servicing companies that can't get money from traditional banks. Should the need arise, these companies will include dented pieces of Cerberus's own
How lucrative are these loan arrangements? The terms vary from deal to deal, but a typical $30 million three-year loan commands a 12% to 14% yield to maturity. If the borrower can't
pay, Ableco gets its assets, a move that sometimes amounts to taking possession of the company itself.Headwind issue:
The rest of Cerberus's portfolio is clustered in sectors that currently face problems--banking, manufacturing, retail, and automotive. So companies including
Tower Automotive, Guilford Mills and Rafaella, will all need some combination of clever management, lower energy prices, and a rebound in consumer spending to survive. For the firm
that loved deals with hair on them, 2008 is going to be woolly.Worth noting:
Feinberg made a bet with a private equity competitor that he could run the New York City marathon in under four hours. He trained for a day and did it in