Bloomberg News

Cerberus Said to Gather More Than $1.5 Billion for Fund

January 30, 2013

Cerberus Capital Management LP, the private-equity firm seeking to sell gunmaker Freedom Group Inc., has closed on more than $1.5 billion for its latest distressed fund, according to two people with knowledge of the matter.

Cerberus Institutional Partners V LP, which came to market targeting $3.75 billion, is expected to wrap up fundraising late in the first quarter, said the people, who asked not to be named because the fund isn’t public.

The firm, which is based in New York and oversees more than $20 billion, has been in the market since April 2011 as the hunt for new cash became more competitive in the wake of the 2008 global financial crisis. The fund stood at more than $1.1 billion at the end of 2012’s first quarter, meaning it has raised about $400 million since then.

The predecessor pool, raised in 2006 near the height of the buyout boom, stood at $7.5 billion. John Dillard, a spokesman for Cerberus at Weber Shandwick, declined to comment on the current fundraising.

The firm’s fifth flagship fund will invest in distressed securities as well as operational turnarounds primarily in North America and Western Europe, according to one of the people. It has already invested $673 million, mostly in deals such as residential and commercial mortgage-backed securities, they said. The fund last year bought the Yellow Pages business of AT&T Inc.

Freedom Group

Fund V gained $142.8 million from the start of the investment period on March 29 through Sept. 30, producing a 45 percent net internal rate of return, according to one of the people. The prior fund was producing a 7.3 percent return, according to another person.

Cerberus bet on Chrysler LLC and GMAC LLC, the financing arm of General Motors, during the buyout boom. It gave up ownership in Chrysler when the carmaker filed for Chapter 11 bankruptcy reorganization in 2009 and kept its control of lender Chrysler Financial Corp., selling that stake in 2011 to Toronto- Dominion Bank for $6.3 billion. Cerberus lost control of GMAC and its stake was diluted in a 2008 bailout by the U.S. Treasury department.

Cerberus owns gunmaker Freedom Group, which makes a type of gun that authorities say was used in the Newtown, Connecticut, school shootings in December that left 26 people dead. Cerberus, which owns the company through its third and fourth funds, put it up for sale four days after the massacre.

To contact the reporter on this story: Sabrina Willmer in New York at swillmer2@bloomberg.net

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net


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