Sunday, August 30, 2009

Cerberus Capital Management Facing an Imminent Shrinkage

I wrote about Cerberus earlier this year when I was discussing their misadventures with the smallest of the Big Three. Now, remember that if corporate news/filing comes out on a Friday afternoon, it is probably bad news. The WSJ reports, in part:
"...Clients are withdrawing more than $5.5 billion, or nearly 71% of the hedge fund assets, in response to big investment losses and their own need for cash, according to people familiar with the matter.

"We have been surprised by this response," Cerberus chief Stephen Feinberg and co-founder William Richter wrote in a letter delivered to clients late Thursday...

...Cerberus will charge investors a 0.5% annual management fee for the wind-down vehicle, a fee that was added in the last week. That amounts to nearly $28 million per year at the current asset level..."

Well, I am surprised that there are still 29% who do not want out. Is Cerberus a part of Cuomo's pay to play investigation? After all, they invested somebody's retirement in Chrysler, GMAC, Azora (the single largest unsecured Lehman creditor, please take a number for the line) and Mervyn's. Mervyn's is alleged to have been a classic example of tunneling: the real estate was transferred to a separate entity, and then that entity jacked up the rents, resulting in Mervyn's Chapter 7. May be they would have gone BK anyway, I do not know, but I am sure that this will be Cerberus' argument in court.

Oh, and the exit ticket is a 0.5% haircut. Not a big deal, right? We've already lost billions, what's a few million?

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