Just how smart is Stephen Feinberg, the principal of Cerberus
Capital? Portfolio’s Daniel Roth tells
On Wall Street, the C.E.O. of Cerberus Capital Management, an investment
firm with $26 billion in assets under management, has long been admired. (“You
probably think you’re smart,” says one former employee. “Now
take your brain and mine, take them to the 28th power, and you have Steve
Wow. A brain to the 28th power? Is that a bit like a 25-standard-deviation
event? I only ask because Mr Feinberg might not be feeling so particularly
clever this morning, after Aegis Mortgage Corporation filed
for bankruptcy, owing more than $600 million to its creditors. Among those
creditors is Madeleine LLC, owed $178 million in unsecured debt and very unlikely
to see any of it.
Madeleine is a part of the Cerberus empire, it turns out, and owns 81% of Aegis.
I don’t know how much money Feinberg paid when he bought Aegis, but all that
is now surely gone as well.
But let’s not concentrate too much on the Feinberg-specific schadenfreude and
miss the bigger story, which is this: companies owned by private-equity shops
are defaulting, now. And those shops include big names like Cerberus.
Lenders have gotten a little starry-eyed in recent years, as private-equity
principals willing to pay eight-figure sums in M&A advisory fees have persuaded
them to fork over billions of dollars to overleveraged companies. I’m sure the
bankers told themselves that these private-equity types make lots and lots of
money – and that the only way they can continue to make money is if their
portfolio companies don’t do things like file for bankruptcy.
Well, so much for that theory.