Wednesday, March 19, 2008

We're Carlyle, but Not That Carlyle!

It took some White House quality word bending, but The Carlyle Group's IPO of China Pacific Insurance remains on track after the liquidation of its last public offering, Carlyle Capital Corporation. After reading their defense, I stamped it Dana Perino quality:

China's third majority life insurer and second majority property insurer China Pacific Insurance (Group) Co., Ltd. confirmed that Carlyle Capital Corp. had no relationship with the insurers' two foreign shareholders. The foreign shareholders are Parallel Investors Holdings Ltd. (PIHL) and Carlyle Holdings Mauritius Ltd. (CHML), two investment entities under the wings of Carlyle Group, not Carlyle Capital. Therefore, the recent bankrupt Carlyle Capital will not trouble the Hong Kong listing of CPIC, according to people at CPIC.

The private equity firm is famous not only for its insider political influence, but for segregating corporate assets into various corporations and subcorporations. In acquiring ManorCare, the huge long term care company, Carlyle split nursing home real estate from operations. In the case of a law suit, a harmed patient or surviving family member can't get at the building and its asset value. Carlyle usually finds ways to control their affiliates, even those that have gone public. They do so via controlling interests and board appointees. Their dance away from folded CCC is priceless.

Previously, Carlyle Group announced that it was just an investment consultant for Carlyle Capital, under the agreement between them, and it did not buy any securities of Carlyle Capital, although some persons in Carlyle Group totally hold an about 15% stake in Carlyle Capital.

Those "some persons" would be the founders and executives of the Carlyle Group, also known as its main principals. Contrast this statement with last summer's Forbes' piece on CCC's public offering:

The initial offering price for shares in Guernsey-based Carlyle Capital had already been reduced to $19 a share from $20-$22 when they came up for grabs on Wednesday. The company's Washington-based parent, Carlyle Group, trimmed the price on June 29 because of "instability in the credit markets that affected investor appetite," according to spokesperson Emma Thorpe.

Isn't that like a parent to abandon their child when they get in trouble? No rescue for CCC. Instead, Carlyle co-founder David Rubenstein let Carlyle Capital sink under the rising tide of bad mortgages. I bet they're hoping for a quiet Pacific typhoon season as China Pacific Insurance goes public. Carlyle's LifeCare affiliate didn't perform very well in the aftermath of Hurricane Katrina. But that's apparently a story for another day...