Chrysler Financial may be sold to Canada's second-largest bank
Published on Friday, January 7, 2011
Toronto-Dominion Bank, Canada's second-largest bank, may reach an agreement as soon as this week to acquire Chrysler Financial Corp., the auto-loan company owned by Cerberus Capital Management LP, said three people with knowledge of the matter.
Chrysler Financial may sell for almost $6 billion to $7 billion, which is the company's book value, or assets minus liabilities, said one of the people, who declined to be identified because the matter is private.
Discussions with Toronto-Dominion could still fall apart, and other potential buyers are talking with Cerberus, the people said. An agreement could also slip into next week, one person said.
Cerberus is likely to recoup all of its investment in Chrysler Financial and return some money to investors, according to the people.
Chrysler Financial, based in suburban Detroit, is mostly comprised of old car and truck loans that are still being paid off by consumers, along with a platform and technology that a buyer could use to start an auto-lending business, said two people. ING Groep NV is also among buyers in talks with Cerberus, the Wall Street Journal reported.
Toronto-Dominion has spent more than $19.9 billion expanding in the U.S. during the past six years. The Toronto-based lender has purchased banks including Banknorth Group of Portland, Maine, and Cherry Hill, New Jersey-based Commerce Bancorp. It now has a network of 1,300 branches in U.S. states from Maine to Florida - - more branches than it has in Canada.
Purchase interest
CEO Edmund Clark said as recently as this month that the bank is primarily interested in buying Federal Deposit Insurance Corp.-assisted transactions and “small” purchases, which he defined in February as being less than $10 billion in assets.
Wojtek Dabrowski, a Toronto-Dominion spokesman, said the bank doesn't comment on rumor or speculation. Peter Duda, a spokesman for Cerberus, wasn't immediately available to comment.
In addition to its retail network, Toronto-Dominion is the largest investor in TD Ameritrade Holding Corp., owning about 46 percent of the Omaha, Nebraska-based brokerage.
Clark expressed an interest last month in entering automobile leasing in Canada, which domestic banks have been banned from doing since 1980. The Canadian government has been looking at changing regulations.
Clark told reporters in Montreal Nov. 25 that Canadian banks could expand their automobile leasing business by offering loans through dealerships rather than in bank branches.
Profit rising
Toronto-Dominion reported last week that fourth-quarter profit dropped 1.6 percent to C$994 million, led by a decline in trading and underwriting fees. While profit from the bank's TD Securities investment bank dropped 74 percent, earnings more than doubled at its U.S. consumer banking arm.
Clark has said he expects Toronto-Dominion to earn $1.6 billion a year from its U.S. operations within three years.
Cerberus, led by founder Stephen Feinberg, wagered on the U.S. auto industry with takeovers of General Motors Corp.'s auto lender in 2006, followed by the Chrysler automaker and lender the following year. The deals preceded a decline in U.S. auto sales that sent both carmakers into bankruptcy.
Feinberg, 50, subsequently lost control of both GMAC and Chrysler and held on to Chrysler Financial. The lender repaid its $1.5 billion in U.S. Treasury Department bailout funds last year and in July sought to return to large-scale lending.
The surviving Chrysler automaker is now controlled by managers from Fiat SpA.
Source : Automotive News