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Cerberus Says No Sale

DETROIT, June 2 (Reuters) – Cerberus Capital Management has not sold any of its equity in finance company GMAC or U.S. automaker Chrysler since those deals closed, the private equity firm said on Monday, as the transactions came under renewed scrutiny amid a sharp downturn in the U.S auto market.

Cerberus was responding to a report in the Financial Times that said the firm had sold most of its holdings in those two auto-related assets at a time when both have been hit hard by the downturn in the U.S. economy and tighter credit markets.

“Cerberus has not reduced or made any changes to its equity stakes in GMAC or Chrysler since the closing of either transaction,” the firm said in a statement. “Cerberus continues to have voting control over both investments.”

Cerberus has acknowledged that both investments were made with co-investors, some of whom were also existing investors in Cerberus funds in 2006 and 2007.

New York-based Cerberus never commits more than 5 percent of the money in any of its funds to a single investment, limiting exposure to both Chrysler and GMAC, a spokesman said.

The private equity firm has not detailed its co-investors, or specified their ownership in GMAC and Chrysler. Cerberus has also not detailed how much of its funds were invested in the high-profile deals for 51 percent of GMAC and 80.1 percent of Chrysler.

The Financial Times reported on Monday that Cerberus had sold “significantly” more than half of its stake in GMAC and Chrysler LLC to a group of about 90 investors. 

At the time Chrysler's sale by Daimler AG (DAIGn.DE: Quote, Profile, Research) was announced in May 2007, Daimler and Cerberus had said that it was a Cerberus affiliate that was acquiring 80.1 percent of the No. 3 U.S. automaker. The stake of any co-investor was not disclosed then.

In the year since, Cerberus has run into difficulty with its high-profile automotive deals. Chrysler, like other major automakers, has been hurt by the sharp downturn in U.S. auto sales and the shift from higher-margin trucks to small cars. GMAC, meanwhile, has suffered from losses at its mortgage financing unit.

The Financial Times said Cerberus earned fees of up to $1 billion for the sale of its holdings as it unloaded risk to other investors, the newspaper said.

Chrysler executives have repeatedly said that Cerberus founder Steve Feinberg is committed to a long-term investment strategy for the automaker and to restoring what they say he regards as an “American icon.”

UAW President Ron Gettelfinger, who endorsed the Chrysler sale, said last year that he had been convinced that Cerberus would not “strip and flip” the automaker's assets. A UAW spokesman was not available for comment on Monday.

Feinberg, who shuns media attention, has not made any public comments since the Chrysler deal was announced.

The newspaper said investors in the group that bought stakes in the automotive assets with Cerberus included Aozora Bank of Japan, Avenue Capital, Cyrus Capital Partners, Franklin Templeton Investments and Oak Hill Advisors.

Aozora Bank (8304.T: Quote, Profile, Research) posted a 93 percent drop in earnings for the March-ended fiscal year due in part to losses related to the U.S. subprime loan market and GMAC.

Aozora, which is nearly 46 percent owned by Cerberus, has said it made a $500 million investment in GMAC as part of the Cerberus-led consortium that bought a 51 percent stake in the finance company from General Motors Corp (GM.N: Quote, Profile, Research) in 2006.

(Reporting by Kevin Krolicki, editing by Dave Zimmerman, Gerald E. McCormick, Gary Hill)