Saturday, July 16, 2016

Brazilian Banks Subsidize Carlyle's Scalina Sale

Reuter's reported:

Lupo SA, a Brazilian underwear producer, has agreed to buy Scalina SA, a lingerie and hosiery maker backed by Carlyle Group LP, for an undisclosed sum.
A source with direct knowledge of the deal told Reuters that Lupo and Scalina's owners - Carlyle, millionaire Artur Grynbaum and the company's founding Heilberg family - negotiated a price tag of around 90 million reais ($28 million) for the company.
Six years ago Carlyle acquired a 51% stake in Scalina for 280 million Brazilian reais ($160 million).  An earlier Reuter's piece detailed the challenges Carlyle faced in operating Scalina:

In 2010, when Carlyle bought 51 percent of Scalina, revenue was growing at an annual rate of 20 percent.

But one year later, when Scalina's retail strategy foundered, the buyout firm allowed a new investor group led by Grynbaum to inject cash in the company in exchange for the minority stake.

Carlyle has been trying to sell Scalina for the past three years, since the economy show signs of cooling, the sources said.
Carlyle is finally out of Brazilian lingerie.

Under the plan, proceeds from the deal will be used to help repay part of 160 million reais ($48.65 million) in loans that Scalina took from Ita├║ Unibanco Holding SA, Banco Santander Brasil SA and Banco do Brasil SA, the sources added. As part of the agreement, the banks will take a loss on the principal of the debt.
Carlyle likely got something from the company, management fees, debt for dividend, or a portion of new investor funds.  But Carlyle's Brazilian underwear venture shrank significantly.

I find it hard to believe Carlyle recouped their original $68.3 million cash investment in Scalina.  If they did it was due to the generosity of the company, a new investor and the final bank subsidy.  Carlyle and Scalina know but they aren't talking.

Update:  Oddly The Intercept has a story on Brazilian billionaires.  It seems Brazil's super wealthy have much in common with our greed and leverage boys. 

Update 7-28-16:  Carlyle plans to sell a huge stake in Brazilian travel operator CVC.