Wednesday, July 25, 2007

Cerberus

(Special Intra-Day Post)

In case you have forgotten your Greek mythology, Cerberus was the three-headed hound, keeper of the gates of Hades. Apt name for a private equity fund, eh? The Dog From Hell? (What were they thinking of when they picked that name?)

Well, they just delayed the Chrysler takeover loan deal - there is simply no demand. In other words, they couldn't find anyone that would stick the loans inside a CDO or CLO and sell them to the public at anything approaching reasonable interest rates.

Just a few days ago I was writing... "Seriously, though: failed offerings are always signs of a top and with good reason. Markets are all about the balance between supply and demand and such failed issues are the best proof of lack of demand."

This is a failed offering and it seems like the bank(s) and Cerberus itself are "eating" the paper.

Oh, and KKR just joined the party. The Boots loans are not selling, either. And you know what's funny? Those alchemists have finally done the unthinkable: they managed to turn gold into lead.Bbefore the LBO announcement Boots CDS's were trading at 27 bp and now they trade at 450 bp. Quick, someone tell me: where exactly is the added value in LBO's?

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