Monday, March 14, 2011

Carlye Group Gets "Make Up Ships" for Failed Wood Deal?

"Markets like totalitarian governments."--Larry Fink, BlackRock
After The Carlyle Group's investment in China Forestry went limp, China made pleasy-pleasy by signing long-term ship leases with a Carlyle joint venture. Gerry Wang will head the new venture.

Once upon a time, China Forestry seemed solid.   WSJ reported:

China Forestry has a market capitalization of HK$9.03 billion and counts private equity firm Carlyle Group LLC as a major shareholder.
Carlyle had this to say in December 2009, when China Forestry went public on the Hong Kong market, raising $200 million:

“Carlyle is proud to have supported (China Forestry) with global resources and management expertise to help realize their business and strategic initiatives."
Carlyle bragged in their annual report:

We realized several substantial listings on public equity markets in 2009 and early 2010, including:
China Forestry Holdings. Plantation forest operator in China listed on the Hong Kong
Stock Exchange, generating total gross proceeds of $200 million.

Thus far in 2011, authorities arrested China Forestry's CEO for embezzlement, the Hong Kong exchange suspended trading and an accounting firm hired to conduct an investigation.  As of March 7, the Hang Seng Index dropped China Forestry.

While China Forestry sank, China floated the biggest ever, private-sector shipping deal, financed by The Carlyle Group to the tune of $5 billion.

The ships will be chartered out on long-term leases to companies like container-shipping line Cosco Group and oil giant Cnooc Ltd.
Is this totalitarian kiss and makeup?   Watch to see if Louis Freeh is involved in the investigation.

Update 3-17-11:  Carlyle co-founder Daniel D'Aniello met with Chinese officials in a sharing of policy views.

Update 3-28-11:   Chinese ship builders gain, according to BulletinPanama.

Update 5-5-11:  WSJ reports Carlyle profited from its investment in China Forestry.  The rest of the story is less than confidence inspiring.  That's using the honest form of confidence.