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Toronto-Dominion Bank Close to Deal for Chrysler Financial

Date: Tuesday, December 21, 2010
Author: Gregory Zuckerman, The Wall Street Journal

Toronto-Dominion Bank is close to a $6.3 billion purchase of Chrysler Financial Corp., the auto lender owned by Cerberus Capital Management LP, according to people close to the matter. The deal, they say, could be announced as soon as Tuesday.

Cerberus would retain about $1 billion of assets as part of the deal, a transaction that would help the private-equity and hedge-fund giant salvage much of what had been a failed $7.4 billion investment in Chrysler.

A spokesman for Toronto-Dominion declined to comment. Peter Duda, a spokesman for Cerberus, declined to comment.

News of the deal was first reported by Bloomberg News.

Cerberus was approached about a deal several weeks ago, according to someone familiar with the talks. Other parties including ING Group were involved in discussions at one point, but Toronto-Dominion emerged as the winner.

A sale would be the latest twist in a high-profile saga that earlier had Cerberus investors frustrated, but now could leave them almost whole on their original investment.

In May 2007, Cerberus purchased more than 80% of Chrysler Holding LLC, part of a huge bet on the auto industry by the $23.5 billion firm that included an earlier acquisition of GMAC LLC, an auto lender.

Cerberus relinquished ownership of the company as part of the Treasury Department's move to take over the auto giant, though Cerberus retained Chrysler Financial, the company's finance arm. (Chrysler filed for bankruptcy protection early last year and later was sold to a group including Fiat SpA.)

As for GMAC, it was bailed out with billions of dollars in government aid. Cerberus gave up control of the company, though it retained a stake.

Chrysler Financial, which no longer is affiliated with the auto maker whose name it bears, has seen improved performance lately, as the value of its existing car and truck loans rise in value. Unlike mortgage loans and other consumer debt, auto loans haven't seen big defaults over the past two years, and the value of used automobiles has held up.

The rally in the credit markets has made Chrysler Financial's loans more valuable to investors, while the Federal Reserve's efforts to push down borrowing rates has made the auto-loan business more attractive to lenders.

Write to Gregory Zuckerman at gregory.zuckerman@wsj.com