Saturday, December 6, 2008

Despite Heavy Cash Position, Carlyle Group Stressed

The Carlyle Group is a tale of two companies. Layoffs and office closings greeted Carlyle employees this past week. Yet, the private equity underwriter (PEU) is loaded with $40 billion in cash.

Bloomberg reported on a Standard & Poors study of managed loan funds. It revealed more pain for Carlyle.

Loan funds managed by American International Group Inc., Carlyle Group and KKR Financial Holdings LLC may face downgrades after Standard & Poor’s review of 197 portions of collateralized loan obligations.

“Rapid deterioration in the credit quality of the corporate loans in the underlying collateral pools in recent weeks” led to the move, the New York-based ratings company said today in a statement. The securities, valued at $3.89 billion at issuance, are from 127 CLOs including deals overseen by the three managers, S&P said.

“We will be reviewing the individual investment portfolios of both insurance companies and financial institutions in the upcoming weeks for large exposures to the tranches that are being placed on credit watch,” the report said.

In other words, more dokie is coming in the worldwide economic meltdown. Carlyle has a European Leveraged Finance Team with almost 6 billion Euro's under management. How far will those CELF investments free fall?