DETROIT/NEW YORK (Reuters) - A $4 billion sale of loans being raised by automaker Chrysler LLC following its takeover by buyout firm Cerberus was likely to be postponed from a planned sale this week, a number of sources said on Monday.
By Megan Davies and Faris Khan
DETROIT/NEW YORK (Reuters) - A $4 billion sale of loans being raised by automaker Chrysler LLC following its takeover by buyout firm Cerberus was likely to be postponed from a planned sale this week, a number of sources said on Monday.
Weak credit markets and worsening news from the U.S. autos sector were behind the latest postponement, one source said.
Underwriters have been trying to sell $4 billion of Chrysler's debt to investors in the past few weeks and had set a Monday deadline to participate in the sale, sources previously told Reuters LPC.
!ADVERTISEMENT!Cerberus Capital Management LP <CBS.UL> closed its $7.4 billion deal to buy a majority stake in Chrysler in August from the automaker's former parent, Daimler AG <DAIGn.DE>.
The deal to buy Chrysler has already been funded by the underwriters. Those underwriters are now trying to sell a majority of the debt on to other investors.
They tried to do this in late July but postponed the sale because credit markets were weak. Since the deal closed, proceeds of the loan have been used to fund working capital for Chrysler.
Several separate sources told Reuters LPC that the $4 billion debt sale was likely to be postponed. Confirmation of whether the sale was actually delayed was likely to be known in the next few days, those sources said.
In the three months since the deal closed, Cerberus has moved to step up the pace of a restructuring plan for Chrysler amid signs of a deepening slump in U.S. auto sales.
Cerberus is also under pressure related to other deals it launched when credit markets were more accommodating for leveraged buyouts.
Cerberus pulled out of a planned $4 billion leveraged buyout of equipment rental company United Rentals Inc <URI.N> last week and faced mounting concern from creditors over the outlook for GMAC mortgage unit ResCap on Monday. An investor group led by Cerberus bought a 51 percent stake in GMAC last November from General Motors Corp <GM.N>.
Sales for Chrysler, which counts on North American sales for nearly all its revenue, were down almost 4 percent in the first 10 months of the year.
Industry-wide U.S. auto sales are expected to contract for a second-consecutive year in 2007 to near 16 million units and investors see a risk of an extended decline next year.
(Editing by Braden Reddall)
