Cerberus Will Lose Equity Stake in Chrysler During Restructuring

Joshua Duval

The Obama administration has dictated that Cerberus Capital Management, the holding company that owns a majority stake in Chrysler, will lose its equity stake in the automaker as a condition of the Treasury Department's bailout deal.

As part of the conditions for receiving an additional $6 billion in bailout funds from the Treasury Department, the Obama administration is requiring Chrysler to reduce a "vast majority" of its secured debt, and completely eliminate its unsecured debt and equity.

Cerberus purchased an 80 percent stake in Chrysler from Daimler in 2007. Now, an Obama administration official said on condition of anonymity, Cerberus's stake holds no value, and the firm will no longer have control of the automaker. The secured debt that Cerberus owns is also likely to be restructured under the administration's terms.

According to the Wall Street Journal, Chrysler will retain its majority stake in Chrysler Financial.

Source: The Wall Street Journal

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