Millbrook Capital’s Clay Lifflander On Cerberus' GMAC Purchase

In a battle royale between hedge funds and buyout firms, the hedgies scored a big victory when通用汽车同意销售51％的高利润金融部队，通用汽车Acceptance Corp.，纽约为基础Cerberus Capital Management, in an enormously complicated deal that will earn GM about $14 billion over the next three years. The deal was a coup for Cerberus and its senior managing director,斯蒂芬菲因伯格– not least because, just a week earlier, GM had sold a controlling stake in GMAC's commercial mortgage division to Cerberus' competitor for GMAC, the venerableKohlberg Kravis Roberts– and it was not a move absent of substantial risk. Indeed, according to工作周, which last week chronicled how the deal went down, one person close to GM's board said, "I don't think there is any financial institution in the world that would have done this deal."

A dubious deal, two masters of the universe – one young, one not so young – and a very pretty, if not potentially poisonous feather for one of their caps, compelleddailyii’sRob Veksle坐下来与rClay Lifflander, president of New-York based hedge fund,Millbrook Capital。桌子上的quesiton是为什么。Here is an excerpt from their conversation.

RV:Why would anyone do this deal, Clay?

CL：看着它，人们在造成资本工作的麻烦。对我来说很清楚[Cerebus]在他们的声誉方面赌牧场。他们显然没有得到他们的基金的[金钱];他们不得不参加限制并获得共同投资。在一天结束时，[它是]要求有限公司制定投资决定他们要求你制作，所以你会结束你的投资者的信誉大。

[Still] what they did to protect their downside was pretty clever. They made GM take back $20 billion of presumably the worst receivables – car lease receivabables – before the deal closed. So they got rid of some of the worst credits on the book first. Now that still doesn’t solve the problem that if GM goes bankrupt and you’re a marginal player and you don’t like your car and you’re worried about it getting serviced and you’re not sure what’s going on with the dealership, you just stop paying.... and a similar thing cascades on you in the residual market.

RV:What’s the worst case scenario for Cerberus?

CL: If I assume that residual values go down by 25% and default rates go up by 15% because GM goes bankrupt, maybe it’s a 20% downside on the deal. That’s a guess. I have no inside knowledge.

I mean [Cerebrus] does get to control this without having bought 100%, which is always kind of nice. In fact, they’re kind of using GM's money a little bit. But it looks to me like it’s structured with very little downside and probably they get a bigger share of the upside – if it goes well – than GM does, not in proportion to their 51, 49.

RV:A condition of the deal was that GM would have buy-back rights after three years if they could up their rating.

CL: ...I don’t think GM is ever going to be buying this back. I think they’re going to hell in a hand basket. That’s why Cerberus' bet is more on the mortgage business and on getting more finance business on the auto side than what currently exists. To me this implies GMAC must have some good systems, some good back office and some good execs.

但是，虽然，从通用汽车的角度来看，如果其他人开始通过融资结构，但是如果其他人开始融合激励，他们将如何不再控制这项业务来竞争，而不再控制这项业务。我的意思是真的，这对通用汽车必须是一个非常可怕的移动。他们必须非常绝望地获得现金。

I do view this as ‘bet the ranch for Cerberus... [Cerebrus] is either gonna look like geniuses or like goats.

RV:So who would make this deal?

CL：看，我不会买它。但我会说我的初步反应更沿线：多么白痴，什么坚果，他们怎么能这样做？但是，当我看着他们如何保护他们的缺点时，我转过身来。

I’m starting to think about the dynamic of what’s going on in the [private equity] world: If you have a very limited downside but execute a [business] plan and make a double or triple on one of your deals when no one else would, you look like a genius.

记住Cerberus家伙的债务人士是令人痛苦的。陷入困境的债务人士真的善于保护他们的下行和购买低。如果它没有锻炼，他们不会受到伤害那么糟糕。如果它确实锻炼了，他们会得到巨大的流行音乐。这是他们的游戏，这个看起来像[斯蒂芬菲因伯格]对此非常好。

RV:Would you assume that Feinberg is protecting himself?

CL：除了预订的折扣外，逃离了20亿美元的应收账款，并使通用汽车置于其中的首选 - 我认为让他更多的机会比成比例 - 那些真的是钥匙。加上更多的业务是住宅抵押贷款，我认为人们错过了。

RV:我想知道是否与这笔交易有任何关系的人格或自我。

CL: I don’t know. This one seems more classic for Feinberg than it does for Kravis. I mean this is a distressed deal – [GM] wasn’t in bankruptcy yet – and it’s structured like it.... If you look at the advisors to GM board – theEvercorpguys – those are all restructing guys.David Ying。。。He's a bankruptcy guy. So this really is that. More than a typical buyout in my view...

这里有肯定是自我涉及的，但我不知道它是因为它的自我与亨利是否有。