Investors balk at Chrysler deal

Chrysler Group was busy on Tuesday planning a massive celebration to mark the automaker's imminent return to American-controlled hands, but the Wall Street banks put in charge of raising a $62 billion turnaround package faced increased scrutiny from debt-shy investors.

Cerberus Capital Management will in the coming days close its $7.4 billion acquisition of the automaker from DaimlerChrysler AG, ending nine years of ownership by the German company. And, at Chrysler's headquarters in Auburn Hills, the Daimler name is already being removed from buildings and wiped from corporate stationery.

But, what is still far from certain is investor appetite for the massive funding package used to refinance Chrysler debt and recapitalize the company. Investors have balked at the upcoming pricing of $12 billion of debt for the Chrysler deal, according to people familiar with the transaction who were not authorized to speak on the record.

That hesitance to buy into the sale, according to one of the world's most closely-watched debt investors, may be a signal that the woes in the home mortgage market have spread farther and wider than anyone believed.

"Those that assert that this is merely an isolated subprime crisis should observe very closely the price and terms that lenders are willing to accept with Chrysler finance this week," said Bill Gross, a bond fund manager for Pimco, in a note to clients Tuesday. "That more than anything may wake them, shake them, and tell them that their world has suddenly changed."

That doesn't mean Cerberus will not be able to raise the money or complete the deal. Depending on how the agreement is structured, the firm might end up having to pay higher interest rates than originally envisioned. Detroit News

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