Wednesday, July 11, 2007

Daimler Says No Delay in Chrysler Sale; Shares Drop (Update3)

By Jeremy van Loon

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Chrysler's prototype Aspen HEMI Hybrid

July 11 (Bloomberg) -- DaimlerChrysler AG, the world's second-largest maker of luxury cars, said there's no delay in the sale of the unprofitable Chrysler division amid investor concern that financing for the deal may fall through.

``There is no indication of a delay from our side,'' Thomas Froehlich, a company spokesman, said in a telephone interview. The carmaker expects to complete the sale in the third quarter, he said. Peter Duda, a spokesman for Cerberus Capital Management LP, which is buying Chrysler, also said the deal will close in the third quarter, as scheduled.

The shares fell as much as 2.36 euros, or 3.5 percent, to 66.06 euros and were down 1.7 percent at 4:20 p.m. in Frankfurt. The stock has gained 44 percent this year.

DaimlerChrysler announced in May that it will sell 80.1 percent of Chrysler to private-equity firm Cerberus, which will invest $7.4 billion in a new venture called Chrysler Holding LLC. New York-based Cerberus is seeking $20 billion in loans to take over the unit as interest margins paid by borrowers increase and market conditions weaken.

``This morning, a rumor Cerberus might have problems financing the Chrysler acquisition was doing the rounds, but I think the strong euro is behind today's losses,'' said Oliver Schmidt, a trader at Landesbank Rheinland-Pfalz in Mainz, Germany.

The euro rose 0.2 percent to $1.3758, after reaching $1.3784 earlier, a record. A stronger euro means less income from German-built cars sold in the U.S.

`Awash With Cash'

``I'd be very surprised if they're having trouble, because the world is awash with cash,'' said John Casesa, managing partner of Casesa Strategic Advisors LLC in New York. ``There's lots of firms out there that no one ever heard of with $10 billion in equity on their hands.''

U.S. high-yield loans were bid on June 28 at a four-year low in secondary-market trading, according to data compiled by Standard & Poor's. Chrysler received speculative-grade credit ratings from Moody's Investors Service and S&P for its automotive division and finance unit.

Chrysler, which slipped to fourth place in the U.S. market last year behind Toyota Motor Corp., is in the process of closing a Delaware factory and cutting 13,000 jobs to return to profit by 2008. S&P said on July 2 that it expects Chrysler to ``remain unprofitable until into 2009.''

Moody's rates the Chrysler automotive division at B3, six levels below investment grade, and the financial services unit is ranked two levels higher at B1. S&P ranks both units at B, or five levels below investment grade. The ratings match those at the vehicle units of rival U.S. automakers General Motors Corp. and Ford Motor Co.

There is no date set for shareholders to meet to approve the Chrysler sale, said Froehlich, in response to a report in German trade publication AutomobilWoche that a meeting would be held on Oct. 4.

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