Shareholders of NYSE traded Vertical Capital Income Fund (VCIF) will become shareholders of Carlyle Credit Income Fund. A SEC filing states:
Vertical Capital Income Fund (NYSE: VCIF) (the “Fund”) announced that all conditions to the closing of the previously-announced and shareholder-approved transaction (the “Transaction”) with an affiliate of global investment firm The Carlyle Group Inc. (NASDAQ: CG) (“Carlyle”) have been met and the Transaction will close shortly after the close of business on Friday, July 14, 2023.
The Carlyle Group is a politically connected private equity underwriter (PEU).
Shareholders saw a significant drop in net asset value after 95% of the fund's assets were sold. Carlyle wanted a clean slate to charge performance fees going forward.
Shareholders get to pay higher fees to Carlyle.
CGCIM will receive an annual fee from the Fund of 1.75% of the Fund's month end managed assets (total assets minus the Fund's liabilities other than liabilities relating to indebtedness), which is higher than the current advisory fee of 1.25% on average daily net assets. Additionally, CGCIM is also entitled to an incentive fee of 17.5% of the Fund's pre-incentive fee net investment income, for each calendar quarter subject to an 8.0% annualized hurdle rate, with a catch-up (the "Incentive Fee"). For this purpose, "pre-incentive fee net investment income" means interest income, dividend income, income generated from original issue discounts, payment-in-kind income, and any other income earned or accrued during the calendar quarter, minus the Fund's operating expenses (which, for this purpose shall not include any distribution and/or shareholder servicing fees, litigation, any extraordinary expenses or Incentive Fee) for the quarter.
The base fee is up 40% under Carlyle.
The deal required a sale of most fund assets.
"the Fund has adjusted its net asset value per share ("NAV") from $9.96 as last reported on June 30, 2023, to $8.27 as of today."
As part of the Transaction with an affiliate of Carlyle, Carlyle Global Credit Investment Management L.L.C. ("CGCIM") will become the investment adviser to the Fund.
Shareholders get a new Carlyle stacked board :
Brian Marcus, Lauren Basmadjian, Mark Garbin, Sanjeev Handa, and Joan McCabe, will serve as Trustees of the Fund.
A different Carlyle entity's SEC filings show:
Each of CGCIM, the European Manager and Carlyle CLO Manager is, and the Future Advisers will be, organized and managed such that the individual portfolio managers, as well as the teams and committees of portfolio managers, analysts and senior management (“Investment Teams” and “Investment Committees”),10 responsible for evaluating investment opportunities and making investment decisions on behalf of clients are promptly notified of the opportunities.
CGCIM controls BDC I, BDC II, BDC III and CTAC, and the European Manager and Carlyle CLO Manager are, and any other Advisers will be, controlling, controlled by or under common control with CGCIM
The CGCIM Investment Committee includes:
Brian Marcus, Managing Director of Carlyle
Lauren Basmadjian, Managing Director of Carlyle, Head of Liquid Credit and Head of US Loans and Structured Credit
So two of fund trustees are charged with holding their "investment advisor" accountable when they are on the investment committee of that advisor?
Members of the Carlyle Tactical Private Credit Fund (CTAC) Board include:
Mark Garbin (Independent Director)
Sanjeev Handa (Independent Director)
Joan McCabe (Independent Director)
The three bios of the "independent directors" did mention their board service on a different Carlyle fund but failed to indicate that fund is under the control of the contracted "investment advisor" and how conflicts of interest are to be avoided.
New Carlyle CEO Harvey Schwartz talked about their credit division financing and refinancing affiliate debt. He said paying deal fees to ourselves "is a no-brainer."
How did Carlyle overran a $100 million closed end fund, change its purpose to include collateralized loan obligations, drive down net asset value 17%, charge 40% higher base fee and install conflicted trustees. Did shareholders not read the proxy statement?
This is the kind of progress that makes the greed and leverage boys happy. Its a PEU world.
Update 7-14-23: It's transaction day!
NAV is vertical in an undesirable direction.
Update 7-15-23: Carlyle's sales pitch showed CTAC but didn't disclose the trustee overlap and corresponding conflict of interest.
Update 7-14-23: It's official!
