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Toronto-Dominion to buy Chrysler Financial for $6.3 billion

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On: Wed, Dec 22, 2010 at 4:37PM | By: Sherry Christiansen

Toronto-Dominion to buy Chrysler Financial for $6.3 billion

It’s hard to imagine anyone growing up in America who hasn’t played the board game “Monopoly” at least once in their lives. The popularity of the game is based on the simple idea that it’s fun to imagine being a mogul. Players get to buy up railroads and electric companies, and put up fancy (plastic) hotels. In reality, there is an actual version of “Monopoly” unfolding every day in financial centers all over the world. The most recent shifting of the pieces came when the Toronto-Dominion Bank struck a deal to acquire the Chrysler Financial Corporation from Cerberus Capital Management. The price tag? $6.3 billion in cash, and that’s not funny money!

What this means for car owners who have financed their vehicles through Chrysler Financial is that their money will now be going to Canada. The economic crisis that has seemed to grip the rest of the world appears to be sweeping past Canada. The World Economic Forum has rated Canadian lenders as being among the soundest. Translation: Canada has a lot of money to throw around investing in new businesses. Just last week, the Bank of Montreal bought up Wisconsin’s biggest bank for a cool $4.1 billion.

According to Chrysler Financial CFO, Colleen Johnston, the lender stands to earn its goal of $1.6 billion a year within the next three years. That makes this a solid investment on the part of Toronto-Dominion.

“This is a really good way to put those deposits in the U.S. to work,” said Ian Nakamoto, director of research at MacDougall MacDougall & MacTier Inc. in Toronto, which manages a bulk of Toronto-Dominion shares. “This is further execution of their U.S. strategy to touch more clients.”

When the ink is dried on the contracts, the deal could mean an extra $100 million right out of the gate for Toronto-Dominion. That’s going to look good on anyone’s earning statement. The number crunchers feel that if current trends keep up, the amount of new loans generated through this company could reach around $1 billion a month. That’s a lot of auto sales, and the trickledown effect of that is good news for the American auto industry.

On the Cerberus side, they will get back around 90 percent of its initial investment in Chrysler when this deal goes through. No one seems to be complaining and the big board game of “Monopoly” carries on.


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