Wednesday, April 6, 2022

Credit Stress? Carlyle Group to Take Advantage


Carlyle Group Inc said on Wednesday it has raised $4.6 billion for its second credit fund that provides debt financing to companies, including family-owned businesses and private equity-backed firms.

The new fund, Carlyle Credit Opportunities Fund II, exceeded its initial target of $3.5 billion and is expected have up to $6 billion to deploy when accounting for its ability to borrow.

Rather than buy out the equity Carlyle has been known to buy discounted debt of family-owned companies and force them into bankruptcy.  

Flashback to September 2011 when The Carlyle Group backdoored British carpet maker Brintons'.

In early September, Carlyle Strategic Partners, a global fund, acquired the roughly £18m of senior debt of struggling Brintons and launched what is known as a pre-pack administration. In these proceedings, a company is put into, and bought out of, administration quickly, reaching terms with all creditors. 

Carlyle's credit opportunity arose from buying £18 million in Brintons' debt from Lloyd's Bank.  

The chairman of the Brinton’s family council has spoken out in the wake of the buyout, saying the deal went through without the consent of the family shareholders, who have lost their investment.  “It was taken from under our feet without our consent.”

Carlyle dumped Brintons' £10 million pension obligation on the Pension Protection Fund.  Carlyle did not refund the Pension Protection Fund when it recapitalized in 2015 or when it exited Brintons' in 2017.  Carlyle sold the company to Argand Partners for an undisclosed sum.

Ian Jackson, Managing Director and Co-Head of Carlyle Strategic Partners Funds at The Carlyle Group, said: “Brintons has been a solid investment for us, performing strongly over the last 5 years in a competitive global market."
Carlyle's pension dumping cost the Pension Protection Fund £21.5 million and resulted in a 10% cut in retirement benefits for a portion of those covered under the plan.

Carlyle promoted Glenn Youngkin to Chief Operating Officer in March 2011 and he served on its executive committee.  This group would have reviewed and approved calling Brintons' debt, forcing the prepackaged bankruptcy and shedding the employee pension fund.  

Isn't Carlyle supposed to make money for pension funds, not dump them?  I don't understand how Congress sees fit to continue private equity's preferred taxation via carried interest given PEUs obscene level of greed.

Politicians Red and Blue love PEU and increasingly, more are one.