Cerberus Drowning In Redemption Requests

Mar 31 2009 | 9:31am ET

Cerberus Capital Management, which last year agreed to abandon its 80% equity stake in collapsing carmaker Chrysler, has some more bad news, this time for its hedge fund investors.

The alternative investments giant, which manages $27 billion, told investors in its $2 billion Cerberus Partners fund last week that redemptions, already suspended, are going to take longer to fill than it previously thought, as more withdrawal requests continue to pour in, Bloomberg News reports. To get back some of the money, investors may have to wait years.

“The fund’s withdrawal requests have increased substantially since the fund suspended withdrawals, partially because investors wanted to reserve their place in line and partially due to individual investors’ own liquidity needs,” founder Stephen Feinberg wrote.

“The increase in withdrawals has significantly delayed the period in which we believe we could reasonably pay withdrawing investors.”

Cerberus said in December—just a week after agreeing to forego its equity stake in Chrysler in exchange for a government bail-out—that Cerberus Partners’ gate restrictions had been triggered after investors representing more than 16.5% of its assets sought to pull their money. Now, with withdrawal requests continuing to pile up and performance continuing to spiral down—the fund is down 3% through February of this year after shedding 16% through November last year—the firm says it may hive off some of the funds assets into a special purpose vehicle, which “would be managed by the general partner until it is fully liquidated, a process which might take several years.”

On the bright side, Cerberus said it might pay cash withdrawals during the year-long redemption suspension put in place last year.


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