Stephen Feinberg, the very private founder of Cerberus Capital Management, hates attention. He even put it in writing.
As Andrew Ross Sorkin of the New York Times notes, in Dealbook, Feinberg sent a memo to investors last month, saying: “We despise all the public attention we are getting. We do our best to avoid the spotlight, but, unfortunately, when you do some large deals, such as Chrysler and GMAC, it is hard to avoid.”
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Feinberg does his best to avoid the limelight, sending out more polished speakers as his surrogates, including former Treasury Secretary John W. Snow and former Vice President Dan Quayle.
Quayle has won more credibility in the business world than he ever mustered in politics. In addition to his role as chairman of Cerberus Global Investments, he sits on the board of ski maker K2 Inc. and Aozora Bank of Tokyo. (The bank was part of the Cerberus-led consortium that acquired GMAC.)
Snow was treasury secretary under George W. Bush and a transportation official in the Ford administration. As chairman of Cerberus, he often handles company speaking engagements.
Last July, addressing the National Press Club, he offered a 21st-century adaptation of Gordon Gecko’s philosophy on greed. Debt, Snow said, is good.
“Now sometimes people think of ‘debt’ or leverage as bad,” Snow told the crowd. “In reality, corporate debt and equity are flip sides of the same coin. Both represent positive investments that can create jobs. Debt represents the confidence of the bond markets - people don’t lend money if they don’t have the expectation of a positive return.”
Yet there are widespread fears about the returns on Cerberus investments. “Indeed,” Sorkin writes, “if there is one buyout portfolio that Wall Street worries about most, it is Cerberus’.”
Failure with such a major investment as Chrysler would bring more public scrutiny than Feinberg could bear.
Remember the congressional bailout of the company in 1979? Another bankruptcy threat, brought about by private investment and a belief in debt, would result in Capitol Hill hearings that make the Roger Clemens-Brian McNamee testimony look like child’s play.
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