When Cerberus and several co-investors acquired an auto lending company as part of a larger transaction in 2007, the company was the leading provider of financial services for dealers and customers of several major U.S. auto brands. At the time of acquisition, the company had $76 billion of managed assets in its portfolio of 2.7 million consumer loans and 900,000 leases serviced.
The lending company was severely challenged by the deep 2008 and 2009 recession and the near collapse of the U.S. auto industry that accompanied it. Cerberus was able to utilize its extensive financial and operational expertise to support the lender’s management team during this difficult time, successfully guiding the company through the economic crisis.
Throughout the recession, Cerberus supported the company’s management team to preserve the value of its business while making significant operational improvements throughout the organization. Actions taken by Cerberus with the company included:
- Preserving and improving the company’s funding structure and liquidity by separating it from its parent company’s manufacturing division
- Focusing the lender on its core markets in the U.S. and Canada by selling operations in Mexico, Puerto Rico and Venezuela
- Decreasing costs and improving operations by consolidating field operations, collection and business centers
- Upgrading the company’s out-of-date technology to drive increased efficiency
- Revising product offerings to shift the focus to more profitable services
- Restructuring and refinancing the company’s debt to improve investor recovery
As a result of these efforts and Cerberus’s patient approach, the lending company’s equity nearly doubled from 2009 to 2010, and over the course of Cerberus’s ownership, the company’s book value increased by almost $1 billion.
The lender’s emergence from the U.S. financial crisis as a stronger, more efficient organization with an established network of dealership relationships made it an attractive acquisition target.
In April 2011, Cerberus and its co-investors sold the retail lending and leasing businesses of the company to an international bank, while retaining more than $1 billion in other assets.