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Fairholme's Buffett-Like Deal with AmeriCredit

Bruce Berkowitz explains the mutually beneficial partnership between Fairholme and the finance company.

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Michael Breen: Another interesting position, and I know you can't go into detail because you're on the board now, is AmeriCredit Finance (ACF), where you did some swapping of debt, I believe, for equity, and have a very substantial ownership in the firm. So there's also some opportunities like that. Maybe in general you could just...

Bruce Berkowitz: I think, in general, before I went on the board we did a nice deal with AmeriCredit, where the securitization markets were totally frozen. And it's still out to a large extent for non-AAA paper. We were able to help them securitize their sub-prime loans. And we were able to achieve an 18% yield to maturity, secured by those loans for our shareholders. It was about $130-odd million face value. And on top of that we were able to get a $50 million corporate guarantee from the company.

Michael Breen does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.