Friday, February 17, 2012

Carlyle Group: C3IPO

Valentine's Day found the SEC posting The Carlyle Group's latest IPO filing.  It's the third amended version and second in 2012.

Because The Carlyle Group L.P. will be a holding partnership and will have no material assets other than its ownership of partnership units in Carlyle Holdings held through wholly-owned subsidiaries, we will fund distributions by The Carlyle Group L.P., if any, in three steps:

First, we will cause Carlyle Holdings to make distributions to its partners, including The Carlyle Group L.P.’s wholly-owned subsidiaries. If Carlyle Holdings makes such distributions, the limited partners of Carlyle Holdings will be entitled to receive equivalent distributions pro rata based on their partnership interests in Carlyle Holdings;

Second, we will cause The Carlyle Group L.P.’s wholly-owned subsidiaries to distribute to The Carlyle Group L.P. their share of such distributions, net of taxes and amounts payable under the tax receivable agreement by such wholly-owned subsidiaries; and

Third, The Carlyle Group L.P. will distribute its net share of such distributions to our common unitholders on a pro rata basis.
It's partners first, shareholders last:

In addition, the partnership agreements of the Carlyle Holdings partnerships will provide for cash distributions, which we refer to as “tax distributions,” to the partners of such partnerships if the wholly-owned subsidiaries of The Carlyle Group L.P. which are the general partners of the Carlyle Holdings partnerships determine that the taxable income of the relevant partnership will give rise to taxable income for its partners. Generally, these tax distributions will be computed based on our estimate of the net taxable income of the relevant partnership allocable to a partner multiplied by an assumed tax rate equal to the highest effective marginal combined U.S. federal, state and local income tax rate prescribed for an individual or corporate resident in New York, New York (taking into account the non-deductibility of certain expenses and the character of our income). The Carlyle Holdings partnerships will make tax distributions only to the extent distributions from such partnerships for the relevant year were otherwise insufficient to cover such tax liabilities. The Carlyle Group L.P. is not required to distribute to its common unitholders any of the cash that its wholly-owned subsidiaries may receive as a result of tax distributions by the Carlyle Holdings partnerships.
The IPO is rigged in the DBD's favor.  Carlyle's co-founders control compensation, scoffing at the notion of a board level compensation committee.

Our historical cash distributions include compensatory payments to our senior Carlyle professionals, which we have historically accounted for as distributions from equity rather than as employee compensation, and also include distributions in respect of co-investments made by the owners of the Parent Entities indirectly through the Parent Entities. Distributions related to co-investments are allocable solely to the individuals that funded those co-investments and would not be distributable to our common unitholders. Additionally, the 2010 Mubadala investment was a non-recurring transaction that resulted in a distribution to the existing owners of the Parent Entities in 2010.

The IPO is but Carlyle's latest cash-in. Stockholders are to help the DBD's montetize, nothing more.  Consider the owners as Han Solo under the C3IPO filing:

C3IPO: Sir, If I may venture an opinion...
Han Solo: I'm not really interested in your opinion C3IPO

It's symbolic they call them Units and Unit Holders  Bring on the investment drones..