TXU Is An Outlier, Not An Indicator

I appeared on CBNC earlier today, to discuss the status of Cerberus’ investment in automaker Chrysler. In case you haven’t heard, the auto-maker’s lending arm has decided to cease offering new leases.

This deal is obviously not working out well for Cerberus, but I wanted to put in in broader context. Therefore, I said: “Almost everyone who did a deal in 2007 or the beginning of ’08 — they all kind of look like bad deals right now.”

Also appearing was Henny Sender of the FT, who replied: “I think that if you look at a lot of ’07 deals, actually they look quite good. KKR was saying on its earnings call today that it marked up TXU, the big Texas utility.”

Come on Henny. TXU is, as you said, an energy utility. How many of those do you know that have been marked down in the past year? It’s certainly a huge deal, but it’s also an outlier.

KKR said in that same call that it was reporting a Q1 loss due to markdowns, and every KKR limited partner I speak with laments the firm’s 2007 buying spree at inflated valuations (e.g., First Data Corp.). To suggest TXU is an indication of PE industry health is like saying the economy must be doing well, based on Exxon Mobil profits.

Apologies for not having the video handy, but Redlasso recently suspended its service after being sued by networks like NBC