Wednesday, May 31, 2017

Carlyle's BDC Files for IPO: 100% Level 3 Assets

Seeking Alpha reported on the looming IPO of Carlyle affiliate TCG BDC, formerly Carlyle GMS Finance, Inc:

TCG BDC has a portfolio of 94 investments in 82 companies with total fair value of $1.39B. Total investment income last year was $111M. It will trade in the Nasdaq under the symbol "CGBD." The IPO size is a placeholder amount of $100M.
The prospectus revealed all of TCG BDC's assets are level 3.

Carlyle is coming off a brutal period in its hedge funds.  Nearly all its hedge fund bets went sour.  Surely, it's time for their luck to turn.  That or it's time to dump pumped up assets onto unsuspecting investors.

Level 3— inputs to the valuation methodology are unobservable and significant to overall fair value measurement. The inputs into the determination of fair value require significant management judgment or estimation. Financial instruments that are included in this category generally include investments in privately-held entities, collateralized loan obligations, and certain over-the-counter derivatives where the fair value is based on unobservable inputs. 
Carlyle took Carlyle Capital Corporation public in Amsterdam in July 2007.   The highly leveraged fund declared bankruptcy in March 2008 when residential mortgage backed securities imploded.

Time will reveal if this IPO happens and at what price.  This market is hungry for investment and yield.  We will find out how hungry with Carlyle's BDC.