Sunday, August 16, 2009

Carlyle Group to Lose Another?

PE Hub reported that Standard & Poors downgraded American Achievement's debt to 'SD', selective default. American Achievement is an affiliate of The Carlyle Group.

AAC repurchased $65.3 million of 12.75% senior PIK notes (issued by ultimate parent company American Achievement Group Holding Corp.) in cash for a total of about $22.9 million. The downgrade of the corporate credit rating to ‘SD’ reflects our view that the purchase, which was executed at a price of $350 per $1,000 per principal amount of the notes, was executed at a significant discount to par and is tantamount to a default given the distressed financial condition of the company.

Not only did the Carlyle's AAC buy back debt for 35 cents on the dollar, they got a Baucus/Obama stimulus package $25 billion tax break. Does that hold if American Achievement goes under like Carlyle Capital Corporation, BlueWave Partners, Hawaiian Telecom, Edscha, and IMO CarWash? Who's next?

Don't worry, Carlyle co-founder David Rubenstein plans on using the same tactic to grow his stable. The private equity underwriter (PEU) is buying senior debt in distressed firms. Upon default, Carlyle gets the pink slip.