The trouble with having three heads...

...is that it makes it possible to bite off rather more than one body can absorb. And evidence is growing that Cerberus, the high-profile low-profile private equity shop controlled by Stephen Feinberg—with the dubious, but doubtless well-compensated, assistance of former Treasury secretary John Snow and vice president Dan ‘Potatoe’ Quayle—might have done just that. Consider this little succession of headlines accumulated in recent hours and days:

United Rentals indicated its $7 billion buyout offer from Cerberus is beginning to unravel, in a sign of continued trouble in the LBO debt market.
United Rentals Says Cerberus Balking on Proposed Buyout [$$]
by Andrew Edwards
The Wall Street Journal Nov. 15 2007

GMAC’s ResCap home-mortgage unit may be close to violating certain debt covenants due to a plunge in its net worth.
GMAC Unit Poses Challenge to Cerberus [$$]
by Lingling Wei, John D. Stoll And Valerie Bauerlein
The Wall Street Journal Nov. 15 2007

The market is buzzing about the possibility that the sale of $4 billion of loans backing the August sale of the automaker to Cerberus Capital Management is in trouble. The offering has already been discounted, and it only represents a part of the $7.5 billion the banks holding the paper — including J.P. Morgan Chase and Citigroup — are trying to get off their books.
Will Chrysler Loans Sit in the Showroom?
by Dana Cimilluca
Deal Journal (WSJ) Nov. 9 2007

And that’s before reaching all the way back to the week of Oct. 29-Nov. 2 when GMAC—51 percent owned by Cerberus and a consortium of investors—announced a $1.6 billion loss for the quarter because of steep losses at ResCap.

Or to August, when its portfolio company Aegis Mortgage Corp filed for bankruptcy. And then there’s that little piece of unfinished business with H&R Block, and Cerberus’s proposed acquisition of the less than highly desirable Option One Mortgage Corp.

Cerberus’ subprime woes
by Michael Flaherty
Reuters Aug. 14 2007

It would be nice if Cerberus would foist some equity on the public. Even given the undistinguished crappy post-listing performance of sort-of competitors Fortress Investment Group (FIG), Blackstone (BX), GLG (GLG) and —admittedly with only one day in the books— Ochs-Ziff Capital Mgt (OZM), Feinberg’s Finest look like a screaming short from this parapet.

Comments

[David Merkel]

Don't forget Scottish Re (ugh, gotta wash my mouth out). Not one of their bigger deals, but another loser...