Friday, April 30, 2010

World's Largest Structured Credit Manager: The Carlyle Group

Reuters reported:

Investment firm Carlyle Group on Thursday said it will acquire $5.1 billion of credit assets from Stanfield Capital Partners, a New York-based fixed income money manager, the first of many such deals in a consolidating corner of the market.

Carlyle, one of the world's largest private equity investors, agreed to purchase management contracts on $4.2 billion in collateralized loan obligations, or CLOs, and $950 million in managed account assets.

The purchase will boost Carlyle's assets under management to $18.1 billion and broaden the firm's credit business.

Reuters stated the deal will make Carlyle "the world's largest structured credit managers and an industry consolidator." They left out the "one of".

Consider David Marchick's testimony before Congress on the credit crisis. The Carlyle Managing Director told Senators:

"Moreover, given the staggering amount of new loans that were issued in the 2005 – 2007 that will come due in 2010 – 2014, it will be essential that credit markets can facilitate refinancing of this debt."

Is Carlyle buying affiliate debt on the cheap from Stanfield Capital, with plans to effectively refinance loans coming due in 2010-2014? Are they going for back door acquisitions as debt holders, a stated corporate strategy? Will they approach affiliate debt restructurings different than non-affiliates?

Carlyle co-founder David Rubenstein said private equity underwriters (PEU's) acted reasonably during the boom. Did Rubenstein forget his 2007 comment?

"Greed has taken over."

Yes, it has. How much of the structured credit comeback is a result of Uncle Sam's PPIP?

One of the world's largest owners of structured credit, the kind that imploded in September 2008, faces zero oversight under Senator Dodd's financial regulatory reform. Did Dodd miss Carlyle Capital Corporation's blow up in March 2008? Apparently, what happens in Jersey, stays in Jersey.